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ABSTRACT

This study considered the effects of cost reduction and price determination, a case study of Dangote Cement Factory Obajana, Kogi State. Cost control is an indispensable tool in management as it aids organization to attain their corporate objectives of profit maximization. This study reveals the cost structure in manufacturing type, cost control adopted to minimize waste of resources. In order to achieve the objectives of this research, data were collected using oral interview and questionnaires. Data collected were subjected to analysis using simple percentage, frequency and histogram distribution while the stated hypothesis were tested using chi-square (X2) to ascertain its reliability and objectivity. The result of the research shows that the organizations adopts cost control measures (cost reduction) and this control accords management the opportunity to achieve corporate performance and profitability (optimum price determination). The management should emphasize more on the relationship that exists between cost control and profitability. Finally, the organization should embrace the technological and economic trends in the society in order to have a vital edge over its profitability and price determination optimization for enhanced performance.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The changing nature of present times has placed much emphasis on business that their sustainability must be sought for and ensured. That business strength progressed or outpaced its competitors depends largely on the quality and strength of its management. People always make enquires pertaining to the issues that arouse their interests-How, where, when, how and what it will cost to get the necessary information, that will aid the attainment of the organizational goals.

Cost is hardly evasive in present day business transactions from day to day. Daily expenses are resolved in terms of cost-what cost, how cheap, how costly. In offices cost savings, cost of materials, overhead service cost, labor cost and many others are passively considered. In an economist’s point of view, the same dictions-marginal cost, opportunity cost, cost curve, total cost among others.

The above submissions attempt to suggest that cost perhaps is a most important concept in our everyday lives and most diversely conceived. Hence, the objective of every business organization is charged with both financial and non-financial objectives, which drive them towards the actualization of their set organizational goals

According to Pandy, the financial motives of an organization comprises of:

• Maximization of shareholders wealth

• Profit maximization and

• Service to customers.

Above all, profit maximization ranks the most prominent of the reason of going into business organization. For business to attain its aim, it tends to cut across cost reduction, thereby meeting its minimal cost budgets-profit.

However, Okafor (1983:142) opines that profit is the ultimate measure of overall performance. When management has planned, organized and controlled its human and material resources properly, corporate activities attain a level of effectiveness, which shows up in profit. Probably, profits are acid test of the individual firm’s performance.

In appraising a company, an understanding of the profit mechanism must be in line. The concept of profit maximization is very useful in selecting the alternatives for decision making at the firm level. Profit forecasting is an essential function of any organization management. It relates to projection of future earnings and involves the analysis of the corporate behaviors, the sales volume, prices and competitors strategies etc. The main aspects covered under this area are the nature and control strategies adopted by managerial decision making as towards attaining corporate goals with its budget limit.

Cost control helps firms to improve its profitability via optimum price determination and competitiveness via advantage and customers patronage. Jhingan et el (2004:267) added that cost control has a regulatory effect. For better performance and better results certain means of control have been evolved. Such cost instruments are budgetary control and standard costing. Cost reductions are analyzed via variance analysis.

1.2 Statement of the Problem

This study examines the effects of cost reduction and price determination. It is concerned with the view of discovering whether organization especially manufacturing companies adopts certain cost control measures in their products marketing, as well as production processes, which ultimately have an impact on their profitability and cash flow analysis.

In this aspect of control, it incorporates cost reduction processes and a cost reduction programme, initiated to take the goal of bringing down the margin of business costs from a current level perceived as not too safe, to a desired level, with the ultimate intention of reaching a targeted profit margin. Hence, this study on the effects of cost reduction and price determination, using Dangote Cement Factory Obajana, Kogi State as a case study.

1.3 Purpose of the Study

The purpose of this study is to examine the effects of cost reduction and price determination, a case study of Dangote Cement Factory Obajana, Kogi State. The specific objectives however, are to examine;

1. All the relevant aspects of a given cost control measures, which have direct or indirect impact on the profitability of Dangote Cement Factory Obajana.

2. The relationship, which exists between, budgets, cost – control, cost reduction and profitability of Dangote Cement Factory Obajana.

3. To know the specific cost control measures which have been adopted and applied in Dangote Cement Factory Obajana.

4. The degree of apportionment of the responsibility of cost control measures in Dangote Cement Factory Obajana and how costs can be controlled for firm to attain its given standard.

1.4 Significance of the Study

This study will provide information and data on the effectiveness of cost control (cost reduction) and price determination for organizational growth and performance as well as widen the view held by potential managers and other corporate bodies, who have been in one way or the other perhaps, been have parochial view of the needs of cost control. It will be of great benefit to manufacturing and processing industry(s).