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The Impact Of Cost Control System In Manufacturing Industry

Download material on The Impact Of Cost Control System In Manufacturing Industry   from chapter one to five with reference


The competitive nature of today’s business world coupled with the need for persistent cost reduction and continuous profitability have made it imperative for an organization to be aware of its cost components. This is to ensure that it products are made and sold at least possible price and this is where cost control come into act as a compass to the managers in their daily endeavors of achieving the corporate objectives of the organization and those of the shareholders.

Cost control is the practice of managing and or reducing business expenses. Cost control starts by the business identifying what their costs are and evaluate whether those costs are reasonable and affordable. The, if necessary, they can look for ways to cut costs through method such as cutting back, moving to a less expensive plan or changing service providers.

The analysis involves the study of certain specialized cost concepts such as fixed and variable costs, control cost, differential cost, replacement cost, sunk cost, inventorial cost etc.

The concept of cost control has to do with various means by which management ensures that their cost element do not get out of hand.

According to Malomo (1999), control in the management sense is the “process by which managers ensure that resources are obtained and used effectively and efficiently in the production or manufacturing of goods and services.

Thus, cost control or cost minimization is something that must be going on at all times.


Buttressing this facts Drury (1948), says for cost control to be of greatest utility “it must be in continuous operation so that as waste and efficiency enters the picture, hat are spotted it once before losses have had a chance to accumulate.” Cost control system is really an indispensable tool for an organization to pursue it cost minimization and control objectives and obtains the best fit within its competitive business environment


For an effective and efficient internal and cost control, the management of every production firm is usually concerned with the setting up of rules and regulations including policies which are comprehensive enough to cover or apply to all functional areas of the organization which consists of cost reduction function carried out by the generality of the employees on a day to day basis. Hence, for any limited resources available to produce a higher output for the profit maximization and to be able to compare their actual cost to the budgeted cost.

Therefore, viewed from the above angle, one can see to be an obvious agreement between outlined management movable asset physical cash, inventory salary payment, Banking services, other assets and daily management routine. Related problems which face them are being associated with the following shortcomings:

  1. The sources and application of fund mishandling
  2. Inefficient cost control system
  3. Management weakness or inefficiencies cost allocation to the various sectors concerned
  4. Poor motivation of employees

the above effect the profitability, growth and smooth running of most production sectors and at the end of this research study the management of any producing sector shall be able to know the effect of proper cost control system in any field of their business focus.


The objective of this research is to investigate the impact which an effective and efficient cost control system could have in drastically reducing lapses which could be costly to the enterprise if taken for granted.

The main objectives of the study are as follows:

  1. To know how effective cost control are being administered during each production
  2. To determine the actual and budgetary cost control on every product of each production
  3. To ascertain the costing system in the production sector
  4. To determine the costing inventories
  5. To identify some of the factors militating against effective cost control system and make necessary suggestions for the improvement and effective cost control system.


The following three hypotheses were tested in this study:

Let HO: Null hypotheses

HI: Alternative hypotheses

  1. HO: cost controlling information does not ensure cost consciousness and profit mindedness.
  2. HO: the current cost reduction policies of Mighty God investment are not very effective in enhancing the profitability of the organization
  3. HO: separate cost controlling department/unit is not desirable for cost management

HI: separate cost controlling department/unit is desirable for effective management.

It is obvious that this research study is of great importance not only of Mighty God investment but also to all production/manufacturing concerns in Nigeria because of the cost control involved. The lack of education and general awareness undoubtedly could be pointed out as one of the reasons for this unpleasant scenario in our economy today. Hence, he study becomes inevitable as:

1.It will help the Nigerian production sector to know the importance of cost reduction scheme and control in their business

2.It will sensitize them on how best cost control can be achieved

3.It will expose the consequence of an enterprise without efficient and effective cost control

4.It will educate both the management and staffs on the importance of cost control.

5.It would also correct erroneous notion that the cost control system is not too vital in the profit making process of any sector


At this point it is very necessary to define the scope of this study, especially what the study centers around:

  1. Mighty God investment
  2. Only those areas of cost control concerned with the cost management and cost minimization
  3. Appraisal of the costing policies of the organization under study with the aim of ascertaining its efficiencies and effectiveness


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