Abstract

This research work is to examine the role which cost accounting plays as far as the profitability in an organization is concerned. It shall seek to evaluate the types of decisions that can be made and the contribution of cost accounting to such decisions, the role of various costing techniques in relation to profitability and how cost accounting facilitates the communication process in organizations.

It will go further to look at the various methods or processes of decision making, decision making techniques, tolls and when each of them would be most appropriate to make the best decisions that could increase the profit level of the organizations.

Furthermore the findings of the research would be presented and analyzed. Here the performance of the organizations for the past two years would be analyzed. This part would try to come out with the types of decisions that can be made from cost accounting application and the consequences or how they can improve on the organization’s activities.

Finally it ends with the recommendations and limitations that could not only help C.D.C to improve on the use and application of cost accounting but also to improve on the overall performance of the organization.

CHAPTER ONE

INTRODUCTION

This chapter comprises of the following subtopics: background of the study, statement of the problem, objectives of the study, research hypothesis, significance of the study, scope and limitation of the study, definition of terms.

1.1 Background information of the Study

The origin of accounting         can be traced as far back as 4000BC where by wealth owners of property employed the services of managers called stewards at that time to look over their property. The later so serve them with accounts or a report on how their properties and assets have been managed.

In the earliest tomes, wealthy owners of properties saw accounting as a very useful or vital instrument that could help them because it served the function of providing information to wealthy owners of property with a means of safeguarding it from embezzlement, mismanagement and misappropriation. However, at that time accounting was known as the process or system of recording business transactions in an orderly manner. Which was known as “book keeping” has remained primitive until recent times.

In fact, the accounting procedures used today for the ordering and recording business transactions have their origin in the practice employed by the great Italian merchant during the early part of the renaissance set out by LUCA PACIOLI in his famous treaties, that is ‘summa de arithmetica, geometrica, proportion et timalita’ which became known as the double entry book keeping, but this was not widely used in western Europe until the early part of the 19 century.

Accounting is moving away from its traditional way of encompassing record keeping to such related work as the preparation of budgets and final accounts (profit or loss account, balance sheet and cash flow statements) and also towards the role which emphasizes social importance.

The unpredictable nature of business and the constant changing conditions of their activities is very important to every organization engaged in production and sale of goods.

In this light, management is therefore frequently faced with the task of taking decisions that relate to the effects of such changes on its costs and revenues. Therefore, the success of a business is generally attributable in great measure of the ability of its management personal to cope with probable conditions of the future. Short range as well as long-term plans must be made accomplished through sound management evaluation. However, many tools are used in controlling and coordinating the activities of the business.

One of the tools which encompass vital and needed information in guiding companies profit path is the cost accounting application.

Accounting is made up of three branches which are: Financial accounting, Management accounting and Cost accounting. These three branches are not mutually exclusive but are usually constituted in the discussion of business accounting. My research shall be based on one of these three branches which would be Cost Accounting.

1.2 Problem Statement

Cost accounting application is a vital tool to management in profit making. Nevertheless, management still faces a lot of difficulties in implementing this technique. The main difficulty faced by organizations in the fact that actual cost tends to be higher than budgeted cost. Thus managers of these organizations for instance C.D.C find it difficult to decide on the cost technique to implement in order to achieve the company’s objectives.

The importance of cost in the determination of prices is very necessary to management since without the knowledge on the cost incurred in production, determination of prices become difficult thus leading to inaccurate prices and profits. To come out with decisions that can be followed to remedy or ameliorate this situation, I am going to center on questions like;

1.3 Research Questions

1. What level of sales will be needed to cover its cost exactly in the first year of the product being marketed?
2. What increase in sales revenue will be needed to maintain current profit level, if worker demand for higher wages?
3. What will be the effect on the cost of providing tons of palm oil at C.D.C if their programs to modernize plant facilities reduce the workforce by say 50%?
4. How management can understand the manner in which cost responds to changes in sales volume and the effect on the interaction of cost and revenue on profit level?

Check out: Accounting Project Topics with Materials