Abstract

This study examines the effect of production cost analysis on the financial performance of Société Anonyme des Boissons du Cameroun (SABC), a leading beverage manufacturer in Cameroon. In an increasingly competitive and cost-sensitive market, effective cost management is critical for sustaining profitability and operational efficiency.

The research focuses on three key components of production costs—raw materials, labor, and overheads and evaluates their impact on SABC’s financial outcomes, including profitability, return on investment (ROI), and liquidity. Using a mixed-methods approach, the study collected primary data through structured questionnaires administered to 120 employees across finance, production, and cost-control departments, supplemented by secondary data from SABC’s financial reports.

Regression analysis revealed significant positive relationships between cost management and financial performance: raw material costs (coefficient = 0.682, p = 0.011), labor costs (coefficient = 0.687, p = 0.012), and overhead costs (coefficient = 0.562, p = 0.029). Findings indicate that while SABC employs strategies like bulk purchasing, automation, and Activity-Based Costing (ABC), inconsistencies in local sourcing, overtime monitoring, and cost-reporting transparency hinder optimal results.

The study concludes that systematic production cost analysis enhances financial performance but recommends tighter controls on raw material wastage, alignment of labor incentives with productivity, and clearer communication of overhead savings. These measures would strengthen SABC’s cost efficiency and competitive positioning.

CHAPTER ONE

GENERAL INTRODUCTION

1.1    Background of the Study 

In today’s increasingly competitive and globalized economy, the effective management of production costs has become a cornerstone for the sustainability and profitability of businesses across all sectors. As firms strive to maximize output while minimizing input, cost analysis has emerged as a critical tool for informed decision-making. The rising costs of raw materials, energy, and labor combined with pressure from global markets demand that companies continuously monitor and evaluate their production expenditures to maintain a competitive edge.

Over the past few decades, large-scale manufacturing companies, especially in industrialized nations, have adopted advanced cost accounting techniques such as Activity-Based Costing (ABC), Standard Costing, and Marginal Costing. These methods provide deeper insights into how resources are consumed in the production process and how this affects overall financial performance. Empirical evidence from countries like the United States, Germany, and Japan indicates that organizations that implement cost analysis mechanisms effectively tend to exhibit higher operational efficiency, better budget control, and improved profit margins.

Furthermore, the integration of technology in cost management through Enterprise Resource Planning (ERP) systems and cost analytics software has enabled firms worldwide to monitor costs in real-time, reduce wastage, and forecast financial performance with greater accuracy. This global trend highlights the strategic role of cost analysis in aligning production processes with financial goals.

Despite these advances, in many developing economies and emerging markets, such as in parts of Africa and Asia, the adoption of formal cost analysis frameworks remains limited. This gap often results in cost inefficiencies, poor pricing decisions, and suboptimal financial outcomes. Hence, understanding how production cost analysis affects financial performance on a global scale is crucial for benchmarking best practices and guiding policy and managerial improvements.

In Cameroon, the manufacturing sector plays a vital role in economic growth, with companies like SABC contributing significantly to employment and GDP. However, many firms face challenges related to rising production costs, inefficient resource use, and limited access to modern cost management tools. As competition increases and profit margins tighten, understanding and analyzing production costs has become essential for improving financial performance.

In spite the importance of cost control, some Cameroonian firms still rely on basic or outdated accounting practices, leading to poor budgeting, weak pricing strategies, and reduced profitability. By implementing proper production cost analysis, companies can better allocate resources, reduce wastage, and enhance decision-making, ultimately boosting their financial outcomes.

Many firms in Douala encounter challenges such as high energy costs, supply chain inefficiencies, and limited adoption of advanced cost control techniques. These issues often lead to poor cost allocation and reduced profitability. In such a context, production cost analysis becomes a strategic tool that can help businesses make informed financial decisions, reduce losses, and improve overall performance.

Société Anonyme des Boissons du Cameroun (SABC), a leading beverage in Cameroon, operates in a highly competitive industry where production cost management is a key determinant of profitability. The company’s financial performance depends on its ability to control production costs, optimize pricing strategies, and efficiently allocate resources. However, with fluctuating raw material prices, operational inefficiencies, and market competition, SABC faces challenges that requires comprehensive production cost analysis to enhance decision-making and improve financial outcome.  

Production Cost analysis involve a detailed examination of all the expenses directly associated with the manufacturing process, including raw materials, labor and overheads. It help businesses to identify cost-saving opportunities, set appropriate pricing strategies, and improve resource allocation. In the case of SABC, an in-depth production cost analysis can provide insights on how production cost influence profitability, how pricing strategies affect revenue, and how financial performance can be optimize through production cost control measures. This study seeks to examine the effects of production cost analysis on the financial performance of SABC by evaluating the production cost structure, identifying inefficiencies, and proposing recommendations for cost optimization. The finding of this research will be valuable for management, policy makers, and stakeholders in improving financial decision-making and ensuring long-term business sustainability.

1.2    Statement of the Problem

In today’s increasingly competitive and cost-sensitive market, firms are under constant pressure to improve their financial performance while ensuring product quality and customer satisfaction. For a major industrial player like SABC, managing production costs efficiently is critical to sustaining profitability and long-term growth.

SABC operates in a challenging environment marked by high input costs, currency fluctuations, and intense competition from both local producers and imported brands. One of the key factors affecting the company’s cost structure is its dependence on imported raw materials, which account for over 70% of its total input needs. This reliance exposes the company to international market volatility, import tariffs, shipping delays, and exchange rate risks all of which can drive production costs higher and reduce cost predictability.

In such a context, effective production cost analysis becomes essential not only for internal cost control but also for strategic pricing decisions. If SABC succeeds in identifying opportunities to reduce its production costs whether through local sourcing, improved efficiency, or better cost management it may be able to lower the selling prices of its products. This would enhance its competitive positioning, especially in price-sensitive segments of the Cameroonian beverage market, and could lead to increased sales volume and improved financial performance.

However, if cost components such as raw material costs, labor expenses, and overheads are not adequately monitored and optimized, the company may face rising unit costs, narrower profit margins, and diminished ability to compete on price. Moreover, other internal factors such as management style, productivity, marketing strategy, and distribution efficiency also influence how effectively costs are transformed into financial results.

Despite the strategic importance of these issues, there remains a limited understanding of how production cost components impact SABC’s financial outcomes in practice. This study, therefore, aims to explore and quantify the relationship between production cost analysis and the company’s financial performance, providing evidence-based recommendations that could support better cost control and profitability.  Recent studies, such as those by Takwa et al. (2024), emphasize the role of budgetary control in financial success. However, these studies largely focused on SMEs, leaving research gap regarding how cost analysis impacts large companies like SABC operating in Cameroon’s complex economic environment, especially in Douala. Hence, this study seeks to critically examine the extent to which cost analysis contribute to or hinders the financial performances of SABC. It aims to fill the knowledge gap on cost structures, assess the effectiveness of existing cost control tools, and determine whether cost analysis practices are strategically utilized to support investment decisions and profitability enhancement in a large firm context.

1.3    RESEARCH QUESTIONS

1.3.1        Main Research Question

To what extent does production cost analysis affect the financial performance of SABC?

1.3.2        Specific Research Question

1.      How do fluctuations in raw material costs impact the financial performance of SABC?

2.      What is the relationship between labor costs and the financial performance of SABC?

3.      In what ways does overhead cost analysis affect the financial performance of SABC?

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