COST ACCOUNTING AND ITS APPLICATION TO MANAGEMENT PLANNING, CONTROL AND DECISION MAKING

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The main theme of this project is to bring to highlight the importance of costing to the existence of any organization, using the Nigeria Bottling company as a case study. Every activity and operation of an organization involves cost. In view of this, I intend to discuss the objectives, principles, techniques and methods of costing relating to the analysis and gathering of cost information for planning, control and decision making. It must be emphasized, that the existence of a sound well organized basic costing system is fundamental to whatever use is made of the information whether for routine cost ascertainment purposes or for a one-off decision.

Decisions depend on financial factors therefore it is of utmost importance that proper costing methods and techniques suitable for an organization operations to be ascertained, adopted and operated effectively and religiously throughout the organizations` process and operations. In essence, organization are established for a defined purpose which objective can only be seen or shown to the world by the output (product) it produces. For there to be an output the most necessary is the input. Inputs do not come for free; payments have to be made on them. Taking the Nigerian Bottling Company (NBC) as a case study, it needs inputs in the form of raw materials, labour etc. to produce goods (soft drink) and payment must be made for these inputs, this boils down to cost.

1.2 STATEMENT OF THE PROBLEM

In the past, many companies have witnessed considerable lapses and increasing changes in management disciplines. Costing an important element in the overall operation of an organization through the provision of relevant information about cost is one of the problems organizations are facing. Because there are no satisfactory requirements to maintain detailed cost records, some small firms keep only traditional financial accounts and prepare cost information in an ad-hoc-fashion. In all but small firms this approach is likely to be unsatisfactory.