Costing system is the systematic recording of cost in the event of producing and employment of information obtained for the efficient operation and control of business (John 2012:7). The purpose of costing system is to determine the cost of production and the determination of the cost per unit of a product thereby determining the selling price per unit of product produced.
Any costing system adopted by any company depends on the type of product produced by that company, the nature of production and the information need of the top management of that company. In a bid to record cost accurately and subsequently the use of the cost recorded for control purposes, firms employ costing systems. It is concerned with recording cost at all stages, from setting up of business, purchase of raw materials and the conversion of raw materials through the process of manufacturing into a saleable product or service right through the sale and delivery of finished products. The success of any business organization depends on its effective management of cost, which is minimizing cost so as to achieve the targeted profit.
1.2 Background to the Study
The Nigeria cement industries have undergone major challenges in recent period towards the control of cost of production due to technological advancement and need for expansion of business.
Before 1999, the cement industries were owned by the federal government, it came on board private individuals who under this policy took ownership and control of the cement industries.
The quest to expand and compete favorably within the cement companies, it has become expedient to control the cost of operation so as to be able to remain in the market, selling at the prevailing prices and also making profits for the providers of funds. To be able to achieve this goal, it is good to have trained people to handle cost matters that is, cost Accountant having requisite knowledge about the ascertainment of cost, accumulation of cost and absorption of such cost into production in order to arrive at the total cost of production and maintain an effective costing system.
Any costing system adopted by any business set up is the function of the type of product produced, it nature of production and the information needs of the top management of that business. It is very clear that most business failure in our country is attributed to inability to properly assess rising cost early for effective decision to be taken. The reason for production is not only satisfying customers and making of profits but also to record cost related to the output as accurately as possible and the employment of devises to record cost accurately and subsequently use recorded cost to control, firms employ costing systems. Its main objective is to determine the individual product cost and keeping of cost records to determine if there are excessive costs. The firm employing costing systems is placed in the better position to effectively costing system is placed in the better position to effectively plan and control future cost of its output and major decision affecting its efficiency.
There are basically two major costing systems in use today; specific order costing and operational costing. Though the fundamental principles of cost ascertainment are the same for all of them through the element of cost thus, the costing system in operation in Dangote cement Plc Gboko is process costing which is dependent on the nature of production and type of output produced.
For control purposes a manufacturing concern is divided into cost centres and each cost centre is under the control of a manager with necessary resources to carry out the function assigned to him. The company compares the actual results with the plans assess performance of each cost centre and if any variation exists, corrective actions are taken. Cost information is a measure in the operation of a business with which performances can be compinformation is a measure in the operation of a business with which performances can be compared with plans.
Costing system plays an important role in business undertaking. It provides a basis through which the efficiency of the firms operation can be measured. The necessary tools to determine costing system efficiency is the standard costing and budgetary control. Standard costing involves setting standards for the element of cost and comparing them with actual performances and reveal variance. The reason for determining variances is to enable costing system not to only accumulate cost but also to find out reasons for cost accumulation and way of controlling costs.
From this perspective, it can be said that efficient costing system can help to minimize wastage and also makes it possible to direct available resources in more productive direction rather than continuing to spend money on items that are accomplishing little or nothing for the company.
This research study is an attempt to access the costing systems in cement companies using Dangote cement Gboko as a study.
1.3 Statement of the Problem
Dangote Cement Plc is one of the largest cement companies in Nigeria. This type of big organization, there exist various complicated activities involved in running such organization. It should be noted that lack of properly adopting an effective costing system will impair the achievement of organizational goals that is adopting an ineffective costing system may affect the profitability of such company. If the costing system adopted by a company does not assist the management of such company to plan and control its elements of cost and raw materials valuation it will definitely become an impediment to the company, as escalating cost will impair the achievement of targeted profit. It should be noted that some companies fail to implement standard costing and budgetary control which is a tool for measuring performance of a costing system. The absence of this will not reveal variances of planned and actual performances to aid managerial control.
It is in this light that the researcher takes it a duty to investigate the costing system in use at Dangote cement Plc. Gboko and how it is used by management for planning, controlling and profit determination.
1.4 Objectives of the Study
The objectives of this research are:
To investigate and discover how effective is the costing system in the use in Dangote Cement Plc. Gboko, which constitute the basis for the ascertainment of total cost of output produced.
To identify the effect of costing systems on the profit of the company.
To discover how the costing system in use assists management in planning, controlling its element of cost and raw materials valuation method.
To know how the company measures its performances via the implementation of standard costing and budgetary control.
1.5 Research Questions
Research question are logical statements which can be answered by relevant processed data. It is meant to throw more light on research problems. For this research work, the following questions would serve as a research questions;
1. How effective is the costing system in use in Dangote cement which constitutes the basis for ascertainment of total cost of output?
2. Does the costing system in use in the company have any effect on the company’s profit?
3. Does the costing system in use assist management in planning and controlling its element of cost and material valuation?
4. Is there standard costing and budgetary control which is tool for measuring performance put in place in the company?
This study is an attempt to investigate these questions, discover the underlying issues and offer policy recommendations.
1.6 Statement of Research Hypotheses
The research hypotheses underlying this study are:
Ho : An effective costing system does not constitute the basis for the ascertainment of total cost of output.
Ha : An effective costing system constitute the basis for the ascertainment of total output.
Ho: the costing system in use has no significance on the profitability of the company.
Ha: The costing system in use has a significance on the profitability of the company.
Ho: The costing system in use has no significance in planning and controlling of element of cost and material valuation.
Ha: The costing system in use is significant in planning and controlling of element of cost and material valuation.
Ho: Standard costing and budgetary control is not a tool for measuring company’s performances.
Ha: Standard costing and budgetary control is a tool for measuring company’s performance
1.7 Significance of the Study
Any costing system implemented by an organization being it public or private is the measure determinant of the company’s effectiveness and efficiency if being managed by competent personnel. Therefore, it is crucial that a suitable costing system is chosen bearing in mind the kind of product (s) it produces and intends to produce.
This research will be of immense importance to the management of manufacturing companies. It will provides them with potent measures choosing a suitable organized system that will yield a more accurate output, price setting and percentage of profit.
The research will also serve a path in encouraging management in making effective planning and strategic decision at all levels like, pricing decision, product-mix, process improvement decision, discontinuation of a product line and increased profitability.
Finally, the research will benefit researchers in the bid to research into greater depth, if there is efficiency and effectiveness of costing systems in Nigerian cement manufacturing industries.
1.8 Scope and Limitation of the Study
Limitation of the Study
Limitation can be regarded as a constraint or circumstance that may hinder the successful completion of any task. It is important to know that in the course of the study the researcher experienced some practical constraints such as time and financial factor that made him not to conduct an extensive investigation as he may desire.
Scope of the Study
The researcher is looking into the assessment of costing system as a tool for managerial control and profit determination at Dangote Cement Company. The study is concerned with how costing system at Dangote cement Plc Gboko is used by management in planning and controlling the element of cost, how the total cost is determined, how performances is measured and the effect of costing system on the profit of the company.
The study shall not cover the entire Dangote cement companies, but it has delineated to Gboko cement plant in Benue state.
Though the general principles of costing systems are explored, the main area of interest is process costing which is the costing system adopted in cement manufacturing companies.
1.9 Historical Background of Dangote Cement Plc Gboko
The history of the company can be traced as far as in 1960 after the discovery of limestone deposit in Mbayion Gboko Local government of Benue state. The company was incorporated as Benue Cement Company Plc as a Limited liability company in July 16th 1970. The federal government invited AG Zurich to carryout affirmative study for the possible establishment of cement plant in Mbayion, Benue State. It was Cementia Holding Ag Zurich that constructed the plant and acted as a management partner. In August 15th 1980, the plant test run was done and the first lion brand Portland cement was produced and dispatch, officially commissioned in 1981 with a production capacity of 900,000 metric tonnes annually.
Suddenly, in 1999, BCC was privatized by the federal government paving way for Alhaji Aliko Dangote to come in as a core investor in the company having acquired 35 percent equity shares and officially started production in