Effects of standard costing on the profitability of manufacturing companies

Effects of standard costing on the profitability of manufacturing companies (a case study of ama brewery)

ABSTRACT

The topic of this research is effects of standard costing on the profitability of a manufacturing company. The purpose of this study was to discover if the application of standard costing techniques have any effect on profitability, to explore the relationship between standard costing and the profitability of manufacturing companies and also to determine whether standard costing techniques and principles are being adopted and practiced in Nigerian manufacturing companies (Nigerian breweries, Ama Eke, Udi local government of Enugu state). The design of this study is descriptive survey method and the study was conducted at Nigerian breweries, Ama which is the case study of this research work. The instrument of data collection was analyzed using the chi-square method. The researcher discovered the following as her data findings that proper accounting records are kept and are significantly necessary in the management of the company. That the company employs standard costing in costing their product and decisions are made with the standard costing information obtained in the company. That accounting reports are prepared and presented to the company’s management and that actions are taken promptly on the information given in the report. That effective application of standard costing has effect on the profitability of the company. That the company benefit in a significant way through the use of standard costing especially in the improvement of profit. The researcher came to a conclusion that standard costing is widely used in Nigerian manufacturing companies and that standard costing enhances adequate planning, control and decision making processes in the company. That standard costing aids manufacturing companies in the elimination of unprofitable products, provision of costing information and cost control.