It's projects Xtra .com!

COSTING AS AN ESSENTIAL INSTRUMENT IN MATERIALS MANAGEMENT AND CONTROL (A CASE STUDY OF EMENITE PLC ENUGU)

ABSTRACT

The major objective of this research project is to examine the role which costing plays in materials control and management with a view to project the need of cost department in every industrial organization.  In order to highlight the foregoing objective, the survey method of research was employed in the study. Both primary and secondary sources of were utilized in gathering relevant information. The primary sources consists of the questionnaire and oral interview while the secondary sources were gathered from existing literature on the subject matter of the study.  The method data analysis used were simple percentages and chi-square (x2).  The study has proved that costing is a veritable instrument for materials management in any industry.  This study recommends the recognition of a cost department, and of course, the creation of good working environment to enable the department function effectively.  Finally, the study also made a case for the development of the study of costing beyond the existing level in all our tertiary institutions.  Industrial operators should liase with Government to ensure that the curriculum of various institutions are developed to incorporate the increased importance of costing, and at the same time, see to the adequate funding of the programme.

CHAPTER ONE

INTRODUCTION

This chapter deals with the Background of the study; Statement of Problems; Objectives of the study; Significance of the study; Research Questions; Delimitations of the study, Limitation of the study and Definition of terms.

1.1  BACKGROUND OF THE STUDY

The aim of this research work is to identify the role, which costing can play in ensuring effective materials management. Materials management is an essential factor in the manufacturing industry, given the fact that materials are the principal substance for any manufacturing or production process. Materials management and control involves the tedious process of organizing, planning and controlling all activities involved in the procurement, reception, issuance and storage of all material inventories.  This process of organizing, planning and control embraces the technique of costing, hence, the topic “Costing As An Essential Instrument In Materials Management and Control”.

Planning and control are all functions of management and the application of accounting and costing principles is cost Accounting.  Consequently, since the aim of control is to ensure good management, it goes without saying that the terms “costing” and “Cost Accounting” will be used interchangeably as well as “materials management” and “materials control” for the purpose of this research. Since this is an important topic to the sustenance and growth of an manufacturing industry, the researcher has chosen a gigantic manufacturing outfit whose performance over the years is a success story as a study in this work.

Emenite Plc is a successful Building material manufacturing company based here in Enugu.  It is situated at No. 7 Old Abakaliki Road, Emene Enugu, in Enugu State of Nigeria. The company is an affiliate of Eternity Group in Belgium. It was established in Nigeria on 6th October, 1961 as Turners Asbestors Industries Ltd. It started operations in 1963 after being commissioned by the Premier of then Eastern Region of Nigeria, the Late Dr. Michael Iheoaukara Okpara. The name of the company was changed in 1976 from Turners Asbestors Industries Ltd. to Turners Building Products (Emene) Ltd. to reflect the diversification of its production line from Asbestors roofing sheets to include a variety of other building materials.  Furthermore, the name of the company was changed from Turners Building Products (Emene) Ltd to Emenite Plc in 1989 when the company went public. The study of a company like Emenite Plc in a research work on materials management will provide a very reliable insight into the techniques of effective materials management judging from its enviable performance over the years.

Costing as a subject of study over the years; ever since the use of money replaced barter, people have been cost conscious. However, it was the concentration of manufacturing facilities into factories, which gave impetus to the development of recognizable costing systems.  Today, costing has grown in importance that it is widely used beyond manufacturing industries.  Costing aims at providing management with information relating to costs with a view to assisting them in prudent management. Management efficiency is measured from overall objective of the organization. This underscores the importance of efficient materials management in any organization.

The application of costing in the materials handling of any organization will ensure that materials meant for production are optimally utilized for the purpose.  When this is done, the production cost per unit of output will be affordable, thus, enhancing profitability.  This is in contrast to a situation when materials are not handled with any control procedure.  The resultant effect will be lack of adequate control, lack of accountability, losses occasioned by material pilferage, material wastage, material stock-out situation, idle time and inadequate utilization of installed capacity.

With the ever increasing growth in business and level of competition, business organizations are developing modern methods of operation in order to keep afloat.  It will be equivalent to operating in the dark ages if a business organization does not operate with such reliable data as; minimum stock level, maximum stock level, re-order level, and economic ordering quantity.  At the same time, production cost cannot be controlled if at any point in time management is uniformed about the quantity and cost of materials issued to production, as well as the quantity and value of material inventory in stock at any given time.  In addition, it would be difficult to price the product of such organization.

Costing provides an indispensable tool in this all important aspect of planning and control procedures needed to ensure a continuous progress in the existence and operations of any manufacturing concern. Materials management therefore embraces all those techniques aimed at instituting controls in all aspects of materials handling.  It involves the procedure, which aims to ensure effective and efficient accounting for materials inventory with the aid of relevant source documents like purchase order, issue voucher, etc.  It includes materials costing and valuation, which employs such tools as stock taking and stock valuation.