Assessment of Analysis and Control of Overhead Expenses in Manufacturing Industry in Nigeria

Chapter One of Assessment of Analysis and Control of Overhead Expenses in Manufacturing Industry in Nigeria

INTRODUCTION

BACKGROUND TO THE STUDY

Every manufacturing organization in ars costs in the production of goods and rendering of services. Some of such costs cannot be directly traced to a particular cost centre or cost unit e.g salary of security quads, salaries of executives, depreciation of plants, rent and rate, office stationary and so on.

At this point, it is worthwhile defining the overhead experiences.

OVERHEAD EXPENSES: According to Odetayo T.A. (1998) overhead expenses is total cost of indirect materials. Indirect labour and indirect expenses. Overhead is the totality of all those costs that cannot be traced to a specific job or product.

The overhead costs as part of the cost of finished products need to be analyzed in order to get them absorbed into all costs of production. As the production advances, there is need to control the overhead expenses in order to minimize cost of production.

A case study approach is used and our focus is in a manufacturing firm Ola Oluwa Aina Wire Industry Limited Osogbo.

Ola-Oluwa Aina Wire Industry Limited is a manufacturing Industry and it has a way of analyzing the overhead expenses incurred. The method of analysis is absorption method, the method ensures that overheads incurred are absorbed property and accounted for.

Control statements are prepared so as to ensure proper accounting for the overheads. This is to safeguard unnecessary increment of overhead. This in other words is to control their expenses and thus maximize their profit.

STATEMENT OF THE PROBLEM

The problem statement that necessitated.

The cost of production in the manufacturing companies is highly exorbitant and it is always difficult to control overhead expense.

This research work intends to assess the analysis of overhead of a manufacturing company and to look for ways controlling the overheads expenses.

HYPOTHESIS OF THE STUDY

Ho: There is no significant relationship between overhead expenses of manufacturing firms and the sales volume of the company.

Hi: There is significant relationship between the overhead expenses of manufacturing firms and the sales volume of the company.

Ho: There is no significant relationship between consumer buying behaviour and the quality of the products.

Hi: There is significant relationship between consumer buying behaviour and the quality of the products.

PURPOSE OF THE STUDY

The purpose of this study is to show the overhead expenses are being assessed, analyzed and controlled in manufacturing industry in Nigeria.

This study will shed light on how manufacturing firms systematically absorb overheads of production and service section. In order to ensure effective price fixing and making of informed decisions on questions relating to cost per unit of product / service.

This study is to show the effectiveness of the application of overhead absorption method ways of controlling the expenses. This study will help both present and prospective manufacturing.

 THE scope/ DELIMITATION OF THE STUDY

This study concentrates on manufacturing firms and centre on Ola-Oluwa Aina Wire Industry Limited Osogbo.

The coverage areas include.

Accounts section production section. Administration service section and marketing section.

These sections have connection with overhead expenses in the factory.

 LIMITATION OF THE STUDY

In the process of carrying out the research study, the researchers experienced some difficulties which areas.

i. The constraint due to time limit on the course of study.

ii. The constraint of combing school academic regular with research works which has to be taking into consideration.

Financial constraint, which includes the cost of transporting from places to places in search of correct and adequate information about the project.
Lack of text books in the library, which treat the researcher topics.

THE SIGNIFICANCE OF THE STUDY

The significant of this study are as follows:

To examine the impact of overhead expenses strategies on market share enhancement.
To examine the various products produced and its effect on the company.
To identity the problems facing producers and solution to the problems.

1.8 Definition Of The Terms

PRODUCTION COST

i. Cost of internality provided services compared with outside service.

ii. The effects on the effects on overhead of an improved layout of plant and machines.

ADMINISTRATION COST

The cost of alternative method of communication.The comparative cost of centralized and decentralized services e.g. typing pools.

MARKETING COST

Comparative costs of different container and package.Comparative costs of selling in various areas.

STRATEGY

A system or tactics used by companies to attract consumer to purchase the company product.

ADVERTISING COST

Any paid form of new personal presentation and overhead expenses of idea, good or services by identifying sponsors.

CONSUMER

Goods: Goods bought by final consumer for personal consumer.

PROMOTION ACTIVITIES

This involved various activities and effects that a company render to see to the sales growth and the creates awareness and eventually enhance repeat purchases by customer.