Project Materials

COSTING AS AN ESSENTIAL INSTRUMENT IN MATERIALS MANAGEMENT AND CONTROL (A CASE STUDY OF EMENITE PLC ENUGU)

ABSTRACT

The primary goal of this research project is to investigate the function that costing plays in material control and management in order to forecast the need for a cost department in every industrial organisation. The study used a survey method of research to highlight the aforementioned purpose. We used both primary and secondary sources to acquire essential information. The questionnaire and oral interview serve as the primary sources, while the secondary sources are drawn from existing literature on the subject of the study. The data was analysed using basic percentages and chi-square (x2). The study demonstrated that costing is a valuable tool for materials management in any sector. This study proposes establishing a cost department and, of course, creating a positive working atmosphere to allow the department to perform properly. Finally, the study established a case for expanding the study of costing beyond the current level in all of our higher institutions. Industrial operators should work with the government to ensure that the curriculum of various institutions is updated to reflect the rising relevance of costing, while also ensuring that the programme is adequately funded.

Chapter one

INTRODUCTION

This chapter discusses the study’s background, statement of problems, objectives, significance, research questions, study limits, and term definitions.

1.1 Background of the Study

The goal of this research is to determine what role costs can play in guaranteeing successful materials management. Materials management is an important issue in the manufacturing business because materials are the primary component of any manufacturing or production process.

Materials management and control refers to the time-consuming process of organising, planning, and managing all activities associated with the procurement, reception, issue, and storage of all material inventories.

This process of organisation, planning, and control incorporates the costing technique, hence the title “Costing As An Essential Instrument In Materials Management and Control”.

Management duties include planning and control, while cost accounting refers to the use of accounting and costing principles. As a result, since the goal of control is to assure excellent management, it goes without saying that the terms “costing” and “Cost Accounting” will be used interchangeably, as will “materials management” and “materials control” for the purposes of this research.

Because this is a crucial topic for the survival and growth of a manufacturing business, the researcher chose a massive manufacturing company whose performance over the years has been a success story to analyse in this work.

Emenite Plc is a prominent building material production firm headquartered in Enugu. It is located at No. 7 Old Abakaliki Road, Emene Enugu, in Enugu State, Nigeria.

The company is affiliated with Belgium’s Eternity Group. Turners Asbestos Industries Ltd. was established in Nigeria on October 6, 1961.

It began operations in 1963 after being commissioned by the Late Dr. Michael Iheoaukara Okpara, Premier of Nigeria’s Eastern Region at the time. Turners Asbestors Industries Ltd.

was renamed Turners construction Products (Emene) Ltd. in 1976 to reflect the company’s diversification of its manufacturing line from asbestos roofing sheets to a number of other construction products.

Furthermore, the company’s name was changed from Turners Building Products (Emene) Ltd to Emenite Plc when it went public in 1989.

The study of a firm like Emenite Plc in a materials management research project will provide a very reliable insight into the techniques of good materials management, judging by its excellent performance over time.

Costing has been a subject of study for many years; ever since money supplanted barter, people have been cost concerned. However, the concentration of production facilities into factories accelerated the development of recognisable costing methods.

Costing has become so important that it is now frequently employed outside of the manufacturing industry. The goal of costing is to provide managers with cost information to help them make sound decisions.

Management efficiency is judged in terms of the organization’s overall objectives. This emphasises the importance of effective material management in any organisation.

The use of costing in any organization’s material management will ensure that production materials are properly utilised for their intended purpose. When this is done, the production cost per unit of output will be lower, increasing profitability.

This is in contrast to a situation in which materials are not handled using any control procedures. The end consequence will be a lack of effective control, accountability, losses caused by material pilferage, material waste, a material stock-out situation, idle time, and insufficient utilisation of installed capacity.

With the ever-increasing growth of company and competition, businesses are inventing innovative operating ways to stay afloat. If a corporate organisation does not use accurate data such as minimum stock level, maximum stock level, re-order level, and economic ordering amount, it will be like operating in the dark ages.

At the same time, production costs cannot be controlled unless management is consistent regarding the quantity and cost of materials issued to production, as well as the quantity and value of material inventory on hand at any one moment. Furthermore, such an organization’s product would be difficult to price.

Costing is an essential instrument in this critical component of planning and control procedures required to ensure continuous progress in the existence and operations of any manufacturing company.

Materials management encompasses all approaches for implementing controls in all elements of material handling. It refers to the technique used to provide effective and efficient accounting for material inventory using relevant source documents such as purchase orders, issuance vouchers, and so on. It comprises materials costing and valuation, which uses tools like stock taking and stock valuation.

1.2 Statement of The Problem

Although most manufacturing organisations have implemented various steps to account for their material inventories, adequate costing methodologies have not been used in this regard.

There is a huge distinction between record keeping and accounting. Record keeping entails noting down in the records every transaction that occurs inside an organisation, but there is no guiding concept.

Accounting, on the other hand, entails meticulously documenting every corporate transaction in accordance with established guidelines.

As a result, records only provide information from which end results can be calculated by a skilled person and can be kept by anyone; accounting, on the other hand, can only be kept by someone trained in the field of accounting

in which case accounting records will incorporate all of the guiding principles necessary to ensure that results are disclosed at all times and are understandable to interested users of accounting information.

With the expansion of industrial activities within the manufacturing sector, it has been demonstrated that simple records, such as those available in a sole proprietorship, fall short of offering a solution to the achievement of organisational goals.

The sole proprietorship is a self-sustaining sort of business that may have no further goals as long as the profits are sufficient to cover household expenses. But in contrast, managerial efficiency in corporate organizations is judged by its level of performance towards the fulfilment of corporate objectives.

Such objectives must, above all, produce an adequate return on invested funds, sufficient to cover the company’s asset claims.

Given these problems, an organised structure is required to assure effective operations; thus, a cost accounting department entrusted with materials control and management must be established.

Furthermore, because materials are the primary component of any manufacturing process, they serve as the foundation for an organization’s long-term survival.

This implies that a significant amount of cash is devoted to material acquisition, demanding sufficient controls to prevent any negative incident that could jeopardise the company’s operations.

Materials control procedures that are effective must always ensure that the occurrence of over-stocking or under-stocking of materials is eliminated.

1.3 Objectives of the Study

The aims of this investigation are as follows:

i. Make a case for using costing systems to control and manage materials.

ii. To emphasise the numerous approaches accessible to organisations for costing and valuing materials, which include: