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COST
ACCOUNTING INFORMATION AND PRICE DETERMINATION
(A FOCUS ON LIFE
BREWERIES LIMITED ONITSHA)
ABSTRACT
The need for cost accounting came with
increased industrialization, engineering an expansion in manufacturing.
It is therefore obvious that in efficient system of costing is essential for
industrial control. The topic, “Cost Accounting Information and Price
Determination” Is teaching about cost accounting when adequately treated and
its uses to the management of the organization in its planning and
decisions. And here, we are trying to apply cost information which is
efficiently determined to pricing policy decision. There is not yet an agreed
best method of costing products though it may be helpful to recognize that cost
allocation are being used to obtain a mutually acceptable price and not
necessary to portray caused and effect relationship of cost incurrence.
But price determination from cost under efficient operation through efficient
cost system will most probably approximate the price of the product to its
value.
TABLE OF CONTENTS
CHAPTER 1
Introduction
Statement of problem
Purpose of study
Significance of
limitation of study
Scope and limitation
of study
Definition of terms
CHAPTER 2
Literature Review
Cost determination
Cost Control
Fixed and variable
cost
Natural and
functional classification cost
Other theoretical
work on cost and pricing
Price flexibility
The Nature of Pricing
problem
Limitation of cost
oriented price
Cost bread pricing
theories
Price to achieve
corporate objectives
CHAPTER 3
Summary of Study
Discussion of
findings
Conclusion
Recommendation
Bibliography
CHAPTER 1:
INTRODUCTION
Background of the
Study
There are no more important decision in
market affairs than those connected with pricing.
No matter how intelligently the
product, distribution and communication mixes are conceived, improper pricing
of a production one of the reason is that price decision cut across all areas
of business operation say “Fred Foy” (1980:P143).
This research therefore, among other
things intends to highlight an management seemingly indifference towards this
all important issues. Through the cost structure especially as it effects
a manufacturing industry constitutes the major determinant of the price product
of firms which vary with circumstances, types of the commodity services
rendered.
Before delving into some of these other
factors that influence product price, let us look at some of these factors at
play in the cost and of beer, component of the cost structure also include:
a.
Historical Accounts: Since actual figures of cost and
revenue obtained from previous periods in a steady economic activities affects
management can use information from it to determine the price of a product.
b.
Budgeted Costs: Management often base its policy on
the information system through which cost can be estimated, usually applied in a
newly established firms.
c.
Market Forces: Demand and supply; the price of beer is
affect by factor in the market because it cannot be rigid in its pricing, since
it is a price taker, so with high demand the price of beer increase and the reverse
is the case.
d.
Capacity of the Factor: This refers to the quantity of the
product that can be produced in a run. The factory with large size will
produce and sell it in lesser price than a small sized ore. For example, Life
Breweries has a capacity of about 500 hectoliters of a 6million cartoons per
year while premier has a capacity of 1200 hectoliters. Under normal
circumstance, premier should be cheeper.
e.
Raw Materials: Beer Brewing requires three major raw
material viz. Malt, Maize and Hop (Malt Extract). Malt constitutes
the major cost of beer, and Malt and hop are being imported. When price
of all those materials increases the price of beer increase and visa
versa. Example when the price of Malt was N20,000.00 per tone, a carton
of beer sales for N600.00 each but now it has gone to N35,000.00 and I sale for
N1000.00per carton. Other factor includes efficiency, economic trends.
Statement of Problem:
The study is geared towards the
solution of the problem encountered by management in pricing and marketing
their products due to inadequate or misleading accounting information.
Instances are where management had unknowingly continued selling products below
out of pocket cost. This researcher intends to provide several cases and
simulations and through proper analysis of these, management would have learnt
the best method of analyzing its costs to obtain adequate information
necessary for pricing policy.
Purpose of Study
The project will attempt to:
a.
X-ray the element of cost involves in the brewing of beer and the extent to
which the cost of price of beer is being influence by the actual cost of
production.
b.
Through the ideal of the actual cost figures involves in the price of beer,
other factors at play in the determination of the price of beer will be known.
c.
To determine an appropriate condition and environment for proper collection and
analysis of cost.
Significance of the
Study
The essence of cost accounting
information came to mind when one realizes that in the modern world of
industrization that no firm can survive without properly costing its products.
And any firm that does not know its information as regards costs, stands the
chance of pricing itself out of the market. The greatest weapon, which a
firm can use against its opponents to maximize efficiency is proper
costing. Ever if price ceiling exists, the firm will still in a
position to maximize its profits that is, reduction in cost without equivalent
reduction in price leads to increase profit.
The more costs are minimized based on information gained, the higher the profit
will be and this is a position increase in government tax hence dissuade the
use of the ‘market watch department” as the pricing guide to some manufacturing
industries especially the beer industry in which m case study is not exempted.
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