Cost Management Practices and Firm’s Performance of Manufacturing Organizations

Abstract

This study investigates the relationship that exists between cost management practices and firm's performance in the manufacturing organizations using data from 40 manufacturing companies listed on the Nigeria stock exchange during the period of 2003 to 2012. Four hypotheses were formulated for the study and tested using t-statistic. The study relied on secondary data extracted from the audited financial statement of the selected companies. Direct material cost, direct labour cost, production overhead cost and administrative overhead cost were taken as independent cost management variables while profitability (Operating profit) was taken as dependent variable representing the firm's performance. The result indicates that a positive significant relationship exists between cost management practices and firm's performance in the manufacturing organization. It is therefore recommended that a cost reduction strategy with emphasis on production overhead cost and administrative overhead cost should be embarked upon if their profit maximization and wealth creation objective must be achieved.

Analysis of overhead cost behavior: case study on decision-making approach

“…In connection with the managerial decision making, there exists another differentiation of cost groups, which are known as controllable and non-controllable costs. As Oluwagbemiga et al (2014) mentioned a controllable cost is any cost which is under the direct influence of a responsible manager for a given time period. It is suggested that the costs and revenue must be related to individual who is responsible for their incurrence.…”

Overhead Costs and Financial Performance of Selected Deposit Money Banks in Nigeria

“…">IntroductionCost effectiveness can lead to rapid improvement of firm's financial performance (Kinyugo, 2014;Liu, Wu, Zyong and Liu, 2020). There exists a direct relationship between effective management of direct and indirect costs and profitability of listed non-financial firms in Nigeria (Oluwagbemiga, Olugbenga and Adeoluwa, 2014;Okezie, Okezie and Ogbu, 2017). However, overhead expenses are either affected by fluctuations in the volume of productions or sales activities (direct/variable overhead) or otherwise (fixed overhead).…”

Factors Influencing Performance Management of Non-Equity Joint Ventures in the Oil Sector

“…The second standpoint considers the consequences of overstaffing on the performance of the joint venture. Generally, the primary goal of business is the economic profit, secondary goals are also pursued without obstructing the main one (Oluwagbemiga, Olugbenga and Zaccheaus, 2014). Creating jobs is a reasonable goal for the Egyptian government, however, this goal now has occupied their first priorities.…”

“…Creating jobs is a reasonable goal for the Egyptian government, however, this goal now has occupied their first priorities. From a costefficiency point of view, managing a company with proper cost structure elevates its profitability and performance (Oluwagbemiga et al, 2014). According to Horngren, Datar, Foster, Rajan and Ittner (2009), costs are variable and fixed based on the activity and size of the business.…”

“…Accumulating employees exceeding the size of production levels of the joint venture would decline its economic return, and hence its performance. Oluwagbemiga et al (2014) concluded that profitable organisations maintain low administrative costs. Accordingly, by combining the two standpoints, the participants' views, and the academic literature, I argue, in this thesis, that the overstaffing of employees in the petroleum joint ventures in Egypt hinders its performance.…”