APPLICATION OF BREAKEVEN ANALYSIS TECHNIQUES IN ENHANCING PROFITABILITY IN A MANUFACTURING COMPANY

CHAPTER ONE

1.00 INTRODUCTION

1.01 GENERAL DESCRIPTION OF THE AREA OF STUDY

Many business organization have in different occasions abruptly folded up and the reason for their bankrupt are sometime not easily identified, some of the reasons that may come to mind include misappropriation of fund, poor management unstable government inability to withstand competition etc. which could lead to high cost of products and make the company not to breakeven, and make profit which I among the reasons or objective of the company.

According to investopdeia (2016), profit is the money a business makes after accounting for all expenses. Regardless of whether the business is a couple of kids running a lemonade stand or a publicly trade, multinational company’s goal. As a result, much of business performance is based on profitability in its various forms. Some analysts are interested in top line profitability, whereas others are only concerned with profitability after all expenses have been paid.

In this study, we will also look into accounting for cost. According to Ajike (2005) said that cost accounting consisting of book-keeping, a record of the cost of the materials, labour and expenses used in a department during a given period of time or the cost of materials, labour and expenses use in completing a given order.

1.2 HISTORY OF CASE STUDY/ORGANIZATION NIGERIA BOTTLING COMPANY PLC ABA.

The Nigerian bottling company plc, which was used to know or usually called Coca-Cola, is an authorized product of Coca-Cola, Fanta, Champion, Fanta-lemon, Fanta-orange, Kite tonic, sprite, etc. it was incorporated in Nigeria in 1951 that is about 65 years today. Coca-Cola, its main and popular product, was first bottled and sold as a drink at a soda fountain in May 1886. The company and it product have since grown from strength to strength and Coca-Cola is now produce and sold in about 150 countries all over the world, where their over one thousand bottlers of which Coca-Cola company is one of them.

The Coca-Cola company is group own fifteen(15) plants and over one thousand mini depot all over the tradition of which Aba plant is one of them.

Its Nigerian headquarter is situated in Ikeja, Lagos state. The company has crown product limited (CPL) which manufactures the crown corks for the drinks and Delta glass industry at Ughelli for its bottling manufacturing. The Aba plant started operations in addition to the training carried out at the branch for staffs generally, by Coca-Cola Africa and the Levities group training school also at Ikeja for various categories of the distribution of its products.

Moreover, special training is regularly organized from time to time for the sale department, production and warehouse department, quality controllers. The Coca-ColaCompany is managed by a plant manager while other departments like sales production and distribution have departmental heads. The plant managers who finally report to the head manager at the head quarter at Lagos also take order from headquarters regarding the affairs of the plant practice and above management structures.

Following the resignation of its management director, Mr. Roland Elbert from its board, Mr. James Michael Lafferty has been appointed as the new managing directors, effective April 14, 2010. Mr. Lafferty was the president and general manager, the Procter and Gamble company, Manila Philippines. The company turn over net profit 2013 was N21,084255, after tax 2013 (N24,860,992) although the net sales revenue decline by 2% in developing the 2013 integrated report, Coca-Cola posted by naira metrics.

1.03 PROBLEM ANALYSIS

The problem in the application of breakeven analysis techniques in enhancing profitability in manufacturing company have tremendous but have been ignored by many business organization.

The consequences are liquidation due to the inability of the company to breakeven so as to make profit.

Hence, the basic problem of this study are

cost accounting principles and techniques makes firms to

operate and losses through making inappropriate use of

cost accounting, thus depriving them the benefit of making profit.

identify their breakeven point.

the management of the company could lead to embarking

upon unprofitable venture.

1.04 PURPOSE OF THE STUDY

The aim of this study is to investigate on how the application of breakeven analysis techniques will enhance profitability in a manufacturing company.

To investigate how the application of breakeven analysis techniques are applied in the determination of cost and profitability in an accounting periods in a manufacturing company. To find out how to improve the company profit rate.

1.05 RELEVANT RESEARCH QUESTIONS

1. Can breakeven analysis lead the company to higher profitability?

2. Is there any negative effect on the decision of management of companies when they failed to adhere to the recommendation of the cost accounting department to enhance profitability?

3. Has this analysis helped companies in achieving their profit motives?

4. Does this breakeven analysis technique influence and improve profitability?

1.06 DELIMITATION (SCOPE) OF THE STUDY

In the study, the researcher is delimited to the application of breakeven analysis techniques in enhancing profitability in a manufacturing company. A study of Nigerian bottling company plc Aba. The study attempt to provide and orderly frame work for identification of the major breakeven analysis techniques in enhancing profitability in the company. The studies based on the information collected from a particular organization, Nigerian bottling company plc, but expanded upon a broad literature review of persons and authors who have contributed in one way or the other in the development of the subject.

In the Course of the research, such problems as lack of time and lack of finance were encountered. The time constraint has to do with the difficulty so as not to let the other academic spheres suffer coupled with the short period giver to complete and submit the work. For one to succeed in any venture, one must be financially viable. This was aggregated by the current difficulty the company is facing.

1.07 ASSUMPTION

It was assumed that the staffs and management of Nigerian bottling company plc, Aba. Will corporate by completing and returning the questionnaire in time and successfully. Also assume that her project supervisor would give guidance as to enable her to conduct a quality research, write quality report and the complete her research on time. It is also assume that through this research, that student in the same field will see it as suitable solutions to their research problems.

1.08 SIGNIFICANCE OF THE STUDY

Many business organization has run into bankruptcy due to inability to breakeven so as to make profit at a high rate which will keep the company moving successfully. This study was particularly embarked upon with the hope that I will be of held to the entire business organization to widen their knowledge on how to apply breakeven analysis techniques in order to enhance profit. The research work will also review to private companies and small scale business the need for setting target to achieve the lay down objectives.

1.09 DEFINITION OF TERMS

1. Profit margin: According to investopedia (2016) is a part of category of profitability ratios calculated at net income divided by revenue or net profit divided by sales.

2. Cost: According to Ajike (2005), this is the amount of expenditure (actual or notioned) insure or tribute to a specified thing or activity.

3. Accounting profit: According to investopedia (2016), it’s a company’s total earnings calculated according to general accepted accounting principles (GAAP). It includes the explicit cost of doing business. Such as operating expenses, depreciation, interest and taxes.

4. Cost accounting: According to WYSE (2003:3) can be define as management information system (MIS) wwhich analyses past, present and future data provide the basis for management action (ISAN 200:1).

5. Underlying profit: According to investopedia (2016), an underlying profit describes the actual reflection of company’s profits.

Often time, ignoring the advice of the cost accountant by
The inability of many management of the company to
The absence of effective and efficient application of...

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