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THE IMPACT OF COST CONTROL ON PROFIT MAXIMIZATION OF
MANUFACTURING COMPANIES IN MOGADISHU -SOMALIA
Thesis · January 2019
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MOGADISHU UNIVERSITY
FACULTY OF ECONOMICS AND MANAGEMENT SCIENCEs
DEPARTMENT OF ACCOUNTING
Title of the Thesis
THE IMPACT OF COST CONTROL ON
PROFIT MAXIMIZATION OF
MANUFACTURING COMPANIES IN
MOGADISHU - SOMALIA
Supervisor
Student
Mr. Said Hassan Abdulkasim
Said Mohamed Mahad
Academic Year 2018-2019
i
APPROVAL
This thesis is submitted in partial fulfillment of the requirement for the
degree of BA in accounting.
Mogadishu University
Academic year: 2018-2019
For Graduate Committee
__________________________
__________________________
__________________________
__________________________
Dean of the Faculty of Economics and Management sciences
___________________________________________
ii
DECLARATION
I hereby declare that this is my original work and has never been presented for a degree or any
award in any university or any academic institution of higher learning. It is all the result of my
own work and under the Supervision of Mr. Said Hassan Abdulkasim.
Graduator
Said Mohamed Mahad
Signature: ……………………….
Date ………/……. /…..
Supervisor
Mr. Said Hassan Abdulkasim
Signature: ………………………
Date: ………/……. /…..
iii
DEDICATION
The work is especially dedicated to my beloved mother Fadumo Ali Artan and my
dear father Mohamed Mahad Ahmed. Without their knowledge, guidance and love, I
wouldn’t have the goals I have to strive and be best to reach my dreams. Mom and
Dad, I know I don’t say it enough, because the love we share is more than just words.
You are the power in me that made this project possible. I also dedicate this
dissertation to my brother Jama Mohamed Mahad.
And lastly, I dedicate to my brothers, sisters, friends and classmates who share their
world of advice and encouragement to finish this study.
Said Mohamed Mahad
iv
ACKNOWLEDGEMENT
All praise is due to Almighty Allah, who gave me the authority and chance to accomplish this
work successfully. I am indebted to a number of individuals and hence, without their
assistance this research could not be completed in time. My first gratitude goes to my parents
and family members who gave me hand in completing this book. I am gratefully
acknowledged to the Faculty of economics and management science at MOGADISHU
UNIVERSITY. Our thanks also go to our most significant academic instructors in the
Accounting Department for their tireless and ambitious efforts to educate us at their best level.
I owe a great deal of gratitude to my supervisor Mr. Said Hassan Abdulkasim; he offered me
constant guidance and many insightful and constructive observations throughout the study.
Basically, his support, encouragement and availability to discuss ideas and problems have
contributed much in completing this study. He always kept me on task and pointing out to my
research objectives.
I also appreciate here by expressing my deeply thanks to all students who sacrificed me for
their golden time, comments, and feedback on this project by incorporating much of their
feedbacks. Finally, I would also like to express my deep sense of gratitude to everyone, who
contributed to my project development process through encouragement, technical support and
anything else for being helpful.
v
TABLE OF CONTENTS
Contents
APPROVAL .......................................................................................................................................... i
DEDICATION .......................................................................................................................................iii
ACKNOWLEDGEMENT .....................................................................................................................iv
TABLE OF CONTENTS ....................................................................................................................... v
LIST OF TABLES ......................................................................................................................... viii
LIST OF FIGURES ..........................................................................................................................x
ABSTRACT .......................................................................................................................................... xii
CHAPTER ONE .................................................................................................................................... 1
INTRODUCTION ................................................................................................................................. 1
1.1 Background to The Study .......................................................................................................... 1
1.2 Problem Statement ..................................................................................................................... 2
1.4 Objective of The Study............................................................................................................... 3
1.4.1 General Objective ................................................................................................................ 3
1.4.2 Specific Objectives ............................................................................................................... 3
1.5 Research Questions .................................................................................................................... 4
1.6 Scope of The Study ..................................................................................................................... 4
1.7 Research Terms .......................................................................................................................... 4
1.8 Conceptual Framework ............................................................................................................. 5
CHAPTER TWO ................................................................................................................................... 7
LITERATURE REVIEW ....................................................................................................................... 7
2.1 Introduction ................................................................................................................................ 7
2.2 Theoretical literature Review .................................................................................................... 7
2.3
An introduction to cost terms and concepts ....................................................................... 7
2.3.1
2.4
Cost, Costing and Cost classification........................................................................... 7
To understand the objective of cost control ........................................................................ 8
2.4.1
2.4.2
Cost control ................................................................................................................... 8
Cost control and Cost reduction .................................................................................... 10
2.5 To understand the requirements needed to ensure an effective cost control system ........... 11
2.5.1 Cost control system ........................................................................................................... 11
2.5.2 Functions of an Effective Cost Control System ............................................................... 12
2.6 To examine the relationship between cost control and profit maximization ....................... 15
2.6.1
Budgetary Control ...................................................................................................... 16
vi
2.6.2
Standard costing and Variance analysis as tools for Cost control .......................... 17
2.7.1 Wastages ............................................................................................................................ 18
2.7.2
Repair and maintenance cost ..................................................................................... 18
2.7.3
High Labor costs ......................................................................................................... 19
2.7.4
Decrease in operational performance ....................................................................... 20
2.8
Empirical Literature Review ............................................................................................. 20
2.9 Summary ................................................................................................................................... 22
CHAPTER THREE.............................................................................................................................. 23
RESEARCH METHODOLOGY ......................................................................................................... 23
3.0 Introduction .............................................................................................................................. 23
3.1 Research Design ....................................................................................................................... 23
3.2 Study Population ...................................................................................................................... 24
3.3 Sampling Techniques ............................................................................................................... 24
3.3.1 Sample Size ........................................................................................................................ 24
3.4 Research Instruments .............................................................................................................. 25
3.5 Data Collection Method ........................................................................................................... 25
3.6 Data Quality Control ............................................................................................................... 26
3.6.1
Validity ........................................................................................................................ 26
3.6.2
Reliability .................................................................................................................... 27
3.7 Data process and Analysis ....................................................................................................... 27
3.8 Ethical Considerations ............................................................................................................. 28
CHAPTER FOUR ................................................................................................................................ 29
DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS .................................... 29
4.0 Introduction .............................................................................................................................. 29
1
4.1 Demographic Responses ........................................................................................................ 29
4.2. DATA PRESENTATION AND ANALYSIS ......................................................................... 34
4.3 Discussion of Findings .............................................................................................................. 50
4.3.1 Characteristics of the research respondents .................................................................... 50
4.3.2 Objectives ........................................................................................................................... 50
4.3.2.2 To understand the requirements needed to ensure an effective cost control system. 51
2
CHAPTER FIVE .......................................................................................................................... 52
3
CONCLUSION AND RECOMMENDATION ............................................................................ 52
5.0 Introduction .............................................................................................................................. 52
5.1 Summary of the Research ........................................................................................................ 52
vii
5.2 Conclusion................................................................................................................................. 53
5.3 Recommendations .................................................................................................................... 54
REFERENCES .................................................................................................................................... 55
APPENDICES ..................................................................................................................................... 58
APPENDIX (1) QUESTIONNAIRE ............................................................................................. 58
SECTION A: DEMOGRAPHIC DATA ...................................................................................... 58
viii
LIST OF TABLES
Table 4.1.1 Gender Respondents .............................................................................................. 29
Table 4.1.2 Marital Status ......................................................................................................... 30
Table 4.1.3 Age ......................................................................................................................... 31
Table 4.1.4 Level of Education ................................................................................................. 32
Table 4.1.5 Experience ............................................................................................................. 33
Table 4.2.1 Manufacturing sector’s performance is being affected by very high cost of
production and operational costs. ...................................................................................... 34
Table 4.2.3 Cost reduction and Cost control are important to an organization as they help to
regulate and reduce unwanted expenses. ........................................................................... 35
Table 4.2.4 Reducing costs directly reflect an increase in the level of profits of an organization
........................................................................................................................................... 36
Table 4.2.5 Cost control increases chances of an organization to sale its products at a lower
rate than its competitors..................................................................................................... 37
Table 4.2.6 Cost control relies heavily on the existence of a sound and effective cost control
system. ............................................................................................................................... 38
Table 4.2.7 The elimination of wastes and non-value adding activities during production aids
to costs reduction ............................................................................................................... 39
Table 4.2.8 To what extent do you agree that companies should carryout educational
awareness on cost control issues?...................................................................................... 40
Table 4.2.9 Cost containment is suitable for costs which are induced by internal factors to the
organization. ...................................................................................................................... 41
Table 4.2.10 Cost control have a significant influence on profit maximization. ...................... 42
Table 4.2.11 Cost control is used as a measure in facilitating corporate profitability and
performance of an organization ......................................................................................... 43
Table 4.2.12 Cost control helps to compare the performance of one company with of another
in the same industry. .......................................................................................................... 44
Table 4.2.13 Every employee should be involved in suggesting cost control initiatives within
the department. .................................................................................................................. 45
Table 4.2.14 The impact of weak cost control techniques is identified as increase in the labor
cost. .................................................................................................................................... 46
ix
Table 4.2.15 Weak cost control techniques have effects on the performance of a business as it
affects its profitability. ....................................................................................................... 47
Table 4.2.17 Inappropriate use of materials is one of the prime causes of increased costs,
wastage through poor control ............................................................................................ 49
x
LIST OF FIGURES
Figure 4.1.1 Gender Respondents ..................................................................... 29
Figure 4.1.2 Marital Status ............................................................................... 30
Figure 4.1.3 Age ............................................................................................... 31
Figure 4.1.4 Level of Education ....................................................................... 32
Figure 4.1.5 Experience .................................................................................... 33
Figure 4.2.1 Manufacturing sector’s performance is being affected by very high
cost of production and operational costs. .................................................... 34
Figure 4.2.3 Cost reduction and Cost control are important to an organization as
they help to regulate and reduce unwanted expenses. ................................. 35
Figure 4.2.4 Reducing costs directly reflect an increase in the level of profits of
an organization ........................................................................................... 36
Figure 4.2.5 Cost control increases chances of an organization to sale its
products at a lower rate than its competitors ............................................... 37
Figure 4.2.6 Cost control relies heavily on the existence of a sound and effective
cost control system. .................................................................................... 38
Figure 4.2.7 The elimination of wastes and non-value adding activities during
production aids to costs reduction .............................................................. 39
Figure 4.2.8 To what extent do you agree that companies should carryout
educational awareness on cost control issues? ............................................ 40
Figure 4.2.9 Cost containment is suitable for costs which are induced by internal
factors to the organization. ......................................................................... 41
Figure 4.2.10 Cost control have a significant influence on profit maximization.
................................................................................................................... 42
Figure 4.2.11 Cost control is used as a measure in facilitating corporate
profitability and performance of an organization ........................................ 43
Figure 4.2.12 Cost control helps to compare the performance of one company
with of another in the same industry. .......................................................... 44
xi
Figure 4.2.13 Every employee should be involved in suggesting cost control
initiatives within the department. ............................................................... 45
Figure 4.2.14 The impact of weak cost control techniques is identified as
increase in the labor cost. ........................................................................... 46
Figure 4.2.15 Weak cost control techniques have effects on the performance of a
business as it affects its profitability. .......................................................... 47
Table 4.2.16 Increase in cost without a proportional increase in labor will
automatically reduce operational performance. .......................................... 48
Figure 4.2.16 Increase in cost without a proportional increase in labor will
automatically reduce operational performance. .......................................... 48
Figure 4.2.17 Inappropriate use of materials is one of the prime causes of
increased costs, wastage through poor control ............................................ 49
xii
ABSTRACT
This study sought to analyze the impact of cost control on profit maximization of
manufacturing companies. An increase in cost (operational and production costs) which added
to reduced profitability in the manufacturing companies arises the need to address the problem
through this research. The study was limited to cost control in manufacturing industry and as
such it did not extend to other sectors of the economy. It was based on the assumption that all
the responses from the companies Somali Plastic Co. and Onkod Mobilya represented other
manufacturing companies.
Descriptive research approach was used to fully satisfy the objective of the study as it gave the
researchers to obtain important and useful data which was valid and reliable. Quantitative
approach was used to collect data. Primary data was obtained from a target population of 55
employees from departments of Somali Plastic Co. and Onkod Mobilya.
Major research findings showed that cost control measures have a positive impact on the
profitability of manufacturing companies as reducing costs directly reflect an increase in the
level of profits of an organization, it was evident that element of costs such as materials, labor
and overhead costs and workers behavior could be strategically controlled with measures like
budgetary control, standard costing and variance analysis, accounting to achieve higher profit
levels. In controlling costs, a good cost control system is required to minimize costs as
wastages is eliminated and inefficiencies reduced during production and throughout an
organization. Also, from the findings, increase in labor costs, material wastages, increase in
repairs and maintenance cost and decrease in operational performance were the effects of cost
technique.
1
CHAPTER ONE
INTRODUCTION
1.1 Background to The Study
An increase in manufacturing costs and reduced sales revenue which has added to reduced
profitability in the Manufacturing sector has produced the need for us to address the problem
through this research. Mapakame (2014) reported that businesses and in particular the
manufacturing companies are finding it difficult to increase their profits and sales volumes
due to various factors. In an economy where consumer’s disposable incomes are very low, a
few companies are experiencing any meaningful increases in market share or sales volumes.
Reduced growth prospects are being accompanied by increased costs. Generally, the costs of
production and other operational costs in this economy are very high as noted by LyntonEdwards Securities (Mapakame, 2014, p. 4). Reduced sales volumes and high cost of
production has led to reduced profitability in these industries. Faced with limited sales growth
prospects, companies have to focus on costs which are a major determinant in profitability
level. Cost control measures have had and need to be used in manufacturing companies to
control and reduce costs to such levels which aid profitability (Mapakame, 2014).
Bloch (2014) reported on how the manufacturing sector has declined with many enterprises
ceasing operations and others downsizing production levels. Factors which contributed to this
decline since 2008 include rampant hyperinflation, which consequently led to increased
production costs, reduced consumer disposable income and minimal availability of
investment. Bloch (2014). There is no doubt that increased costs affect negatively the
operations, profitability and performance of an enterprise (Bloch, 2014).
2
Profit maximization Rank the most prominent of the reason of going into business
organization. For business to attain its aim, it tends to cut across cost reduction, thereby
meeting its minimal cost budgets-profit. However, (Okafor, 1983)opine that profit is the
ultimate measure of overall performance. When management has planned, organized and
controlled its human and material resources properly, corporate activities attain a level of
effectiveness, which shows up in profit. Probably, profits are acid test of the individual firm’s
performance. In appraising a company, we must first understand how profit arises. (Okafor,
1983).
The concept of profit maximization is very useful in selecting the alternatives in
planning at the firm level. Profit forecasting is an essential function of any management. It
relates to projection of future earnings and involves the analysis of the corporate behaviors,
the sales volume, prices and competitors’ strategies etc. The main aspects covered under this
area are the nature and control strategies adopted by managerial decision making as towards
attaining corporate goals with its budget limit. Cost control helps firms to improve its
profitability and competitiveness. Jhingan (2004) added that cost control has a regulatory
effect. For better performance and better results certain means of control have been evolved.
Such cost instruments are budgetary control and standard costing. Cost reductions are
analyzed via variance analysis. (Jhingan, 2004) .
1.2 Problem Statement
This study is confronted with the view of discovering whether organizations especially
manufacturing companies adopt certain cost control measures in their products marketing, as
well as production processes, which ultimately have an impact on their profitability and cash
flow analysis. In this aspect of control, it incorporates cost reduction processes and a cost
reduction program, initiated to take the goal of bringing down the margin of business costs
from a current level perceived as not too safe, to a desired level, with the ultimate intention of
reaching a targeted profit margin. So that an increase in costs (operational and production
costs) which has added to reduced profitability in the Manufacturing companies has produced
the need to address the problem through this research.
3
1.3 Significance of The Study
The research will assist management of various manufacturing companies, in having
time to reflect on the difficulties they are experiencing on cost control. It will highlight areas
where cost control measures have been used to perfection and the impact of cost control
measures on profitability. The research will also assist those charged with governance on
understanding the effects of implementing weak cost control methods Tax authorities and
auditors are not left out of the benefits derivable from cost control. Increase revenue will
subsequently boost infrastructures facilities.
1.4 Objective of The Study
The general and specific objectives are as follows:
1.4.1 General Objective
The general objective of this study is to investigate the impact of cost control on profit
maximization of manufacturing companies in Mogadishu Somalia
1.4.2 Specific Objectives
The specific objectives of this study are:
1.
To understand the objective of cost control
2.
To understand the requirements needed to ensure an effective cost control system.
3.
To examine the relationship between cost control and profit maximization.
4.
To determine the effects of implementing weak cost control techniques.
4
1.5 Research Questions
For emphasis on the study, the following research questions can be used to throw more light
on the study:
1.
What is the objective of cost control?
2.
What are the requirements needed to ensure an effective cost control system?
3.
What is the relationship between cost control and profit maximization?
4.
What are the effects of implementing weak cost control techniques?
1.6 Scope of The Study
This research will reveal the essences of cost control in manufacturing firm, the cost
structure of the sector, cost control measures adopted to minimize waste of resources and
invariably the major procedures embarked to ensure that actual results are in line with the set
standard; so that waste are measured and appropriate action taken to correct the activity.
The study will also envisage the nature of cost accounting in use in the organization by
the management. It will also emphasize on the method of setting standard if the firm adheres
strictly to its standard and application of deviations analyzed and reported. The study shall be
limited to the financial constraints, time range and the availability of resources needed for the
actualization of corporate goals.
1.7 Research Terms
Cost: It is the amount of resources put into the production of goods and or service. It's often
expressed in monetary terms and is also' seen as the expenditure resulting from providing
goods and services.
Cost Control: Control means compelling events to conform to plan. Therefore, cost control
is the process whereby management seeks to influence costs so as to keep them within
planned limits.
5
Cost Center: This is a desirable area of activity within a business to which costs can be
attributed. Such centers incur expenses but do not directly generate revenue, for instance the
personnel department, accounting department, public relation department etc.
Profit Maximization: is the ability for a company to achieve a maximum profit with low
operating expenses.
1.8 Conceptual Framework
INDEPENDENT VARIABLE
DEPENDENT VARIABLE
Profit
Maximization
Cost control
 Management
control
 Motivated
Employees
 Cutting expenses
 Customer
satisfaction
 Employee creativity
 Employee job
satisfaction
Extraneous variables
 Informational technology
 Knowledge sharing
 Quality management system
6
Fig. 1.1 Conceptual Framework
The research aim is to conceptualize the cost controls and reduction practices and
how it affects organizations’ profitability.
If the assets not properly managed,
the cost will automatically become insupportable.
The solution is to inject the desired expertise such as provision of training to its
employees and focus on areas where cost can be controlled outlining the costbenefit of such areas. The organizations also need to be sensitive about customer
care relationship.
This will ensure that a good relationship exist with the
customer hence guaranteeing customer confidence. The organization may impart
the customer care relationship through employees’ training.
7
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter seeks to review literature of existing bodies of literature on the subject of the
research. The chapter analyzed theoretical and empirical evidence findings, and concluded
with the summary.
2.2 Theoretical literature Review
The research study adopted the traditional cost theory and contextual theory of cost.
According to (Abdul & Isiaka, 2015), the traditional cost theory separates between the long
run and short run costs and the theory allows an entity to establish output level that results into
optimum profit, incurring least costs. In the long run period, all factors such as capital
equipment and entrepreneurship become variable where as in the short run period there are
fixed. Costs are grouped into two, fixed costs and total variable costs. Contextual theory of
cost simply states that costs are recognized as expenses in the income statement in the period
which they relate (Abdul & Isiaka, 2015).
2.3
An introduction to cost terms and concepts
2.3.1 Cost, Costing and Cost classification
(Oluwagbemiga, et al. , 2014) defined cost as the monetary value that a company has spent in
order to produce a unit. It is the price for incurring expenditure on an activity. (Weetman,
2010) defined a cost as an amount of expenditure on a defined activity. It is the amounts of
resources given up, expressed in monetary terms, in order to receive a good or services. Cost
provides a basis for costing, which is the process of ascertaining cost (Weetman, 2010).
According to the Institute of Company Secretaries of India (ICSI) (2013), Costing involves
the techniques and processes of ascertaining cost. These techniques consist of principles and
rules which determine procedures to ascertain product or service costs. Cost accounting is a
specialized branch of accounting aimed at costs classification, accumulation, assignment and
control. Cost accounting involves the establishment of budgets, standards costs and actual
8
costs of operations, processes, activities or products, variance analysis and profitability.
((ICSI), 2013)
(Akeem, 2017) costs are classified into various categories in order to facilitate communication
in the cost management system. ((ICSI), 2013) Highlighted different bases of classifying costs
and these include classification based on time (Historical, Pre-determined), on nature or
element (Material, Labor or Overhead), based on traceability (Direct or Indirect) or by
changes in activity (Fixed, Variable, and Semi-variable).
((ICSI), 2013) Further classify cost by function (Manufacturing, Administration, Selling,
Research and Development), by relationship of accounting period (Capital or revenue), by
controllability (Controllable or Non-controllable), for analytical and decision-making process
(Opportunity, Marginal, Sunk, Joint, Deferential, Replacement or Common).
2.4
To understand the objective of cost control
2.4.1 Cost control
(Akeem, 2017) Defined cost control as a process of establishing a standard and maintaining
the performance according to the standard. Thus, cost control is significant to an organization
as it regulates and reduces unwanted expenses. It is more concerned with an element of
marginal costs which involves the determination of unit cost and measurement, costs are kept
within acceptable limits (Akeem, 2017).
According to (Clement, 2015) cost control involves the control of all items of expenditure by
regular and frequent comparison of actual expenditure with predetermined standard or
budgets, so that the undesirable trends from stand can be detected and corrected at an early
stage.
(Adeleke, 2014)Said that cost control is important as it is the prominent supporter of every
business entity and therefore it acts as the bottom line for every company. For an entity to be
profitable, management must have a clear and thorough understanding of all the factors that
drive and affects the profit. Costs are one of the factors that are very crucial (Adeleke, 2014).
According to (Akeem, 2017), benefits which result from cost control are: a simple control can
be expressed over all operation from the purchases of goods to account for sales, cost control
results in an efficient utilization of material and labor and cost control makes policy decisions
9
by management very easy. In many organizations, cost control is essential in the following
areas which include Labor, materials, sales and overheads. (Akeem, 2017).

Labor- the labor cost can be viewed in three ways which are: higher basic salary,
shorter working hours and reduced output. Reducing labor costs is somehow difficult
for many companies because it is not possible to reduce wage rate due to existence of
Trade unions and minimum wage legislations. For management to motivate its
workers, wage rate should be on upward revise, thus the reduction in labor cost is
possible only if overtime rate of output per worker increases faster than the wage rate
increase and this help to raise labor productivity.

Material – The inappropriate use of materials is one of the prime causes of increased
costs, wastage through poor control. For cost to be minimal material wastages must be
controlled.

Sales-The control of sales requires making sure that the organization is not
overspending to achieve its sales goals. Budgets for sales are used for planning and
controlling revenues for companies.

Overheads- these include factory expenditure that cannot be directly charged as any
other element of a product. The cost can be reduced by means of effective absorption,
allocation and apportionment to cost unit.
(Akeem, 2017) Suggested that for an organization to ensure more profit growth there is
needed to control and reduce cost to an acceptable limit. In order to make cost control as a
success, there is need for organization to apply cost control and cost reduction scheme in their
operations. Workers should be motivated to achieve the desired goals and objectives, the
absence of behavior control such as motivation, incentives affect the success of cost control
(Akeem, 2017)
10
2.4.2 Cost control and Cost reduction
(Akeem, 2017) Defined cost reduction as a planned positive approach aimed to reduce
expenditure and it is a reduction in unit cost of goods or services without impairing suitability
for the use intended. Cost control is a process of establishing a standard and maintaining the
performance according to the standard (Akeem, 2017).
According to (Akeem, 2017), Cost reduction and Cost control are important to an organization
as they help to regulate and reduce unwanted expenses. The main aim of cost control is cost
reduction thus cost control and cost reduction work together. Cost reduction’s aim is to see
whether there is any possibility of bringing about savings in the costs incurred (Akeem,
2017).This was supported by Institute of Chartered Accounts of India ((ICSI), 2013).
Suggested that although there is a distinction between cost control and cost reduction, the two
serve the same objective and are mutually exclusive.
(Akeem, 2017) Suggested that any organization that effectively uses cost control and cost
reduction increases the chances of selling its products at a lower rate than its competitors,
without changing its product’s quality. Cost control and cost reduction are of significance to
an organization as they help to regulate and reduce unwanted expenses. ((ICSI), 2013)
Supported by saying that cost reduction entails an effort towards improvement aimed at
achieving a real and permanent reduction in total cost. It means reducing waste, reducing
expenses whilst production remains constant or increases. Cost reduction is not concerned
with maintenance of performance according to the standards; rather it assumes the existence
of concealed potential savings in the standards or norms which are, therefore subjected to a
constant challenge with a view to improvement by bringing out the saving ((ICSI), 2013).
11
2.5 To understand the requirements needed to ensure an effective cost
control system
2.5.1 Cost control system
(Kinney & Raiborn, 2011) and ((ICSI), 2013) defined a cost control system as set of formal
and informal tools and methods designed to manage and regulate organizational costs. Cost
control relies heavily on the existence of a sound and effective cost control system and cost
reduction also operates effectively where there is an efficient cost control system (Kinney &
Raiborn, 2011).
According to (Kinney & Raiborn, 2011), cost control system provides information for
planning and control from the point activities are being planned until after they are performed.
It mainly focuses on information found within the organization and contains the detector,
assessor, effectors, and network components. Control system is part of management cycle
which starts with planning as operational targets and objectives are established without which
control cannot be achieved. The planning phase launches performance goals that become the
inputs to the control phase as shown in the diagram below thus setting up an effective Cost
Control System (Kinney & Raiborn, 2011).
Disclosed two aspects of an effective cost control system which involves; operational control
and accounting control. Operational control is mainly done in small businesses, by which the
manager control costs through personal observation and close supervision of operations. As
the business grows personal control is delegated to the lower level. As the business continues
to grow, operational control is supplemented by accounting control as such control will no
longer be relied upon to keep waste, idleness, inefficiencies and other cost. Accounting
control, this requires creating a system of records which analyze costs, account for them and
supply current pertinent reports to reveal how those who are responsible for are discharging
their responsibilities (Clement, 2015).
According to (Kinney & Raiborn, 2011), a sound control system is formed on the back of
strong cost consciousness. Cost consciousness is a companywide employee attitude toward
topics essential for a specific stage of cost control and these include understanding cost
changes, cost containment, cost avoidance, and cost reduction. Cost control involves a
12
companywide involvement, as managers alone cannot control costs (Kinney & Raiborn,
2011).
2.5.2 Functions of an Effective Cost Control System
Cost Control System
Source: (Kinney & Raiborn, 2011)
Cost understanding-Cost control cannot be achieved without understanding why costs differ
between periods or from the budgeted amounts. It begins when the budget is prepared and
preparation of budgets cannot be done without understanding the reasons causing changes in
cost from period to period. Cost can change due to changes in volumes as with variable costs
and a flexible budget can compensate for such changes, costs also change due to inflation,
supplier costs adjustments and others change due to quantity purchased as quantity discounts.
Understanding such changes helps in controlling costs (Kinney & Raiborn, 2011).
Cost containment- (Kinney & Raiborn, 2011): cost containment involves a process of
minimizing period by period increases in per unit variable and total fixed cost. It only applies
effectively within the organization that is, it cannot be possible for inflation adjustments, tax
and regulatory changes in supply and demand because these forces occur outside the
organization. Thus, cost containment is suitable for costs which are induced by internal factors
to the organization such as costs arising due to reduced supplier competition, quantities
purchased and seasonality (Kinney & Raiborn, 2011).
Cost avoidance- (Kinney & Raiborn, 2011) defined cost avoidance as a way of decreasing
costs by lowering a potential increase in expenses. Cost avoidance is applied where cost
13
containment cannot be implemented and it involves finding acceptable alternatives of not
spending money for unnecessary goods and services (Kinney & Raiborn, 2011)
Cost reduction- According to (Kinney & Raiborn, 2011), cost reduction is closely related to
cost avoidance. The intent of cost avoidance and cost reduction is to lower total costs. Cost
reduction can be implemented at the designed stage to ensure that high costs are not carried
through the life cycle of the product. The process of costs reduction is then extended to the
production level as new opportunities to reduce costs arise. The elimination of wastes and
non-value adding activities during production aids to costs reduction (Kinney & Raiborn,
2011). 2.5.3 Steps in implementing a cost control system
(Kinney & Raiborn, 2011) Revealed a five-step method of implementing a cost control system
that management can adopt to create an environment that conducive to control and
successfully manage its costs. The five-step method for managers involves the following:

Understand the type of costs incurred by an organization - (Kinney & Raiborn,
2011) suggested that, understanding the type of cost incurred by an organization is
very important, are the costs under consideration fixed or variable, product or period?
What are the drivers of those costs? From who were purchases made? When were
purchases made? This is, generically, sometimes referred to as “spend analysis”. (Jim,
2015) supported this by saying that for any organization to implement an effective cost
management system, it must first identify exactly where its revenue comes from and it
must identify specific costs incurred to produce its revenue stream. Finally, it must
identify overhead costs and costs not directly linked to revenue generation (Jim, 2015).

Communicate the need for cost consciousness to all employees- (Kinney &
Raiborn, 2011), suggested that there is need to communicate the need for cost
consciousness environment to all employees and there must be aware of which costs
need to be better controlled and why cost control is important to both themselves and
the company.

Educate employees on cost control issues- (Kinney & Raiborn, 2011), employees
should be educated in cost control issues and they must be encouraged to suggest ways
to control costs, and motivated to embrace cost control concepts. Incentives can range
14
from simple verbal recognition to monetary rewards to time off with pay. Managers
must also be flexible enough to allow for changes from the current method of
operation (Kinney & Raiborn, 2011).
(Jim, 2015) Supported this by saying that, employees should be involved in decisions
relating to cost control and there is need for them to understand the company’s
objectives and have accurate cost information. Also, requesting input from the
employees will not only enable the management to have a better understanding, but
rather it will give employees more incentive to become involved. Organizations that
actively request suggestions from their employees will undoubtedly improve and have
better ways to control cost effectively (Jim, 2015).

Generating reports that indicate actual results- (Kinney & Raiborn, 2011)suggested
that there is need for management to generate reports that indicate actual results,
comparing budgets to actuals, and calculating variances. Management must evaluate
these costs to determine why costs were or were not controlled in the past. Such
analysis can provide insight about cost drivers so that activities driving costs can be
better controlled in the future (Kinney & Raiborn, 2011).

Develop a view that the cost control system is a long-run process- (Kinney &
Raiborn, 2011), suggested that management should develop a view that the cost
control system is a long run- run process, not a short run solution. Cost decisions
should be measured against the company's strategy, rather than a current short-term
situation. A company should not buy an excessive amount of inventory because the
manufacturer has lowered the price to get rid of it. The company should be buying the
amount it needs to satisfy its customers (Kinney & Raiborn, 2011).Cost management
must become standard operating procedure. Management and employees must be
constantly identifying opportunities for eliminating or reducing unprofitable work
(Jim, 2015).
15
2.6 To examine the relationship between cost control and profit
maximization
Profits provide an incentive for entrepreneurs to undertake production. An increase in profit
will encourage more firms to enter a competitive market. It will also provide firms with more
finance to update their capital equipment and expand their business. (Chand, 2015)
A profitable firm will also find it easier to obtain external finance. Shareholders are more
likely to want to buy shares in profitable firms and banks are usually willing to give them
loans. These firms may also find it easier to recruit top managers and directors, attracted by
their success. (Chand, 2015)
The effect of a fall in profit may vary with time. At first it may have little impact on the
behavior of firms, if they think that it will only be short lived. After a while if profits remain
low, or fall further, some fir Ways of Increasing Profit:
The two fundamental ways of increasing profit are to
i. Reduce costs of production
ii. Raise revenue.
There are a number of ways of reducing costs of production. One is by reducing any wastages
and inefficiency. Another is by increasing the productivity of factors of production. In the
short run the second strategy may actually raise costs but in the long run it may lower average
costs and raise revenue by improving quality. (Chand, 2015)
For instance, a firm may spend more on training workers and may replace existing equipment
with more technologically advanced version. In the longer run, these measures should increase
output per worker and per machine and therefore reduce average cost. (Chand, 2015)
A third way is by increasing the size of the firm through merger or takeover. A larger firm
may be able to take greater advantage of economies of scale. It will be likely to have higher
total revenue. It may also have a higher total profit and profit per unit, due to its greater
market share. Firms with considerable market power often have inelastic demand for their
16
products. When demand is inelastic, a firm can increase its revenue by raising price. In
contrast if demand is elastic, the revenue may be raised by cutting down price. (Chand, 2015).
There are cost control techniques that are involved in the cost control processes.
2.6.1 Budgetary Control
Akeem (2017) put forward that budgetary control is pertained with the effective use of
resources to attain a previously determined objective. It is a system through which budgets are
employed as a way of planning and regulating costs. Budgeting is established as to what is to
be accomplished and how it is going to be reached, whereas control assures that the objectives
are realized and current results do not vary from the planned (Akeem, 2017).
Budgets may be prepared to achieve the following purposes: decision making, planning,
performance evaluation and control.
Decision making -Budgetary stimulates decision making, priorities, timing and expenditure.
Management is assisted with detailed information required by various departments,
formulation of plans and achieving business objectives becomes easy.
Planning-Planning process requires detailed information of past performance, present and
forecasting of the future, therefore information about the structure, behavior of expenditure,
revenue trends and demands of various activities and functions of the organization is provided
by budgets.
Control-Budgetary control seeks to reduce wastages and losses to minimum and ensure
favorable use of resources. It ensures that costs are kept under check, as any differences form
the planned cost are examined and explained before a corrective action is taken too lower the
cost to align to the budgeted costs. Also, the budgetary control may incorporate budgetary
systems aimed at improving the cost control process (Akeem, 2017).
17
2.6.2 Standard costing and Variance analysis as tools for Cost control
According to (Akenbor & Agwor, 2015)), standard costing is an integral part of management
accounting control technique, which involves the process of estimating the total cost of
production per unit. It compares the standard cost of each product or service with actual cost
to determine the efficiency of operation. Standard costing is a management decision tool that
allows better cost control and optimal resource utilization (Akenbor & Agwor, 2015)
However, Gauci (2015) put forward criticisms on standard costing arguing that, although
standard costing and variance analysis are effective instruments in cost control but they are
more relevant in medium and large companies rather than in micro and small firms. Also,
standard costing is seen as appropriate in a stable, standardized and repetitive environment,
were all processes should conform to the standards, and any variances should be eliminated
(Gauci, 2015). This was questioned by (Weetman, 2010) who suggested that there is relatively
little likelihood of finding that the expected cost is far away from the true cost.
In variance analysis not every variance is investigated, management considers a number of
factors to decide whether or not to carry out investigations on certain variances. Materiality,
controllability and the level of significance are some of the factors that are taken into
consideration. (Oyewu, 2013)
Gauci (2015) put forward that variances help to reconcile the total cost difference by
comparing actual and standard cost. The main purpose of variances is to provide reasons for
off-standard performance. In this way, management can improve operations, correct errors
and deploy resources more effectively to reduce costs (Gauci, 2015).
18
2.7 The effects of weak cost control techniques.
In the organizations, if cost control techniques are not effectively implemented, they are
higher chances that they will weaken the organization by decreasing its operational
performance. In most cases failure to implement cost control effectively will lead to increased
wastages, repair and maintenance cost and increase in labor cost. Increase in cost without a
proportional increase in labor will automatically reduce operational performance. (Oyewu,
2013).
2.7.1 Wastages
(Akenbor & Agwor, 2015) says that when there is poor cost control, it also means there is
inadequate supervision of workers hence employees can use the resources of the organization
anyhow they like without anyone monitoring them and this obviously results in wastages of
resources. Waste is realized when a comparison is made between the quantities used to
manufacture the products and the quantity obtained that is the final product that have been
manufactured. Waste can be identified differently, that is normal waste and abnormal waste
therefore normal waste is that which is estimated and budgeted for before production take
place and abnormal waste is that which exceeds the normal loss causing an increase in costs as
it may be due to negligence of employees (Akenbor & Agwor, 2015).
2.7.2 Repair and maintenance cost
(Eti, 2014) suggested that repairs and maintenance cost are incurred to bring the asset in the
condition it use to be before and keep it running like it used to. Repair and maintenance cost
can be routine and are already anticipated for but some are not. Those not estimated for can be
because of lack of supervision, negligence by employees, lack of training and high
stockholding levels. Increase in repair and maintenance costs is an indication that they are
weak cost control techniques as there is need for a planned maintenance (Eti, 2014)
According to (Eti, 2014) organizations with effective cost control practices have a wise
maintenance culture i.e. they usually incur relatively low repair and maintenance costs
because cost control starts by making a decision of buying highly –dependable equipment that
cost relatively little to maintain .Benefits for the organization are thereby gained from the
reliable long-lived plant which require lower maintenance costs (Eti, 2014).
19
(Gransberg & O'Connor, 2015) recommended that management in manufacturing companies
should implement equipment life-cycle cost analysis to reduce costs of repairs and
maintenance costs. Equipment life cycle cost analysis is a cost control measure typically used
as one component of the equipment fleet management process. It allows the fleet managers to
make equipment repair, replacement and retention decisions on the basis of a given piece of
equipment’s economic life. Absence of such cost control measure results in most companies
having difficulties in controlling repairs and maintenance costs as it helps managers to
maximize the cost effectiveness of the fleet by optimizing the overall lifecycle value of each
piece in the fleet (Gransberg & O'Connor, 2015).
2.7.3 High Labor costs
According to (Anwar & Dr.Muhammad Aslam, 2011) labor costs are amount of expenditure
incurred by the organization for hiring or employing personnel in exchange of services for the
attainment of organizational goals. Labor cost are classified as one of long-term controllable
costs of an organization because they are caused (increased and decreased) by the
organization. Most organizations use strategic cost control techniques to reduce labor costs as
part of their competitive strategy. The strategies involve the integration of modern technology
and the human resources management to provide a coordinated, broad based and long-term
approaches to reduce labor cost (Anwar & Dr.Muhammad Aslam, 2011)
(Anwar & Dr.Muhammad Aslam, 2011) revealed that some increases in labor costs in most
organizations are as a result of poor cost management, in some cases it shows that cost control
techniques implemented by management will have loopholes. Target set should commensurate
with management labor budget otherwise significant labor variance will arise. Increase in
labor cost can result from management trying to supplement labor variance due to inefficient
management contracts, instead hired labor may be used which will result in the accrual of
additional labor overheads that lead to over expenditure on the labor budget which will in turn
decrease operational performance (Anwar & Dr.Muhammad Aslam, 2011)
However, (Hamermesh, 2014) argued that there are a number of factors that can cause labor
costs to increase or decrease which cannot be attributed organizational weak control methods.
These costs are borne as the market and other circumstances dictate and they include the
location, efficiency, supply and demand. Location, where a company is located will impact the
20
company’s labor cost in that organizations that operate in economically depressed areas often
have lower labor cost than companies located in places where the cost of living is higher and
on the other hand, if the organization seeks skilled employees in area that does not have an
educated workforce, labor costs might higher as there will need to provide financial incentives
to employees for them to relocate (Hamermesh, 2014).
Furthermore, (Hamermesh, 2014) argued that supply and demand also cause variations in
labor cost as that cannot be regulate by cost control techniques. Supply and demand come into
play when management sets wages, just as it does when it is determining the price of a
product or service. If there are shortages of workers in the field that the business will be
operating in, it will have to pay relatively high labor costs. (Hamermesh, 2014).
2.7.4 Decrease in operational performance
(Akenbor & Agwor, 2015) say that the more a firm is careless with cost control techniques or
methods, the more it is inefficient in the use of its resources thus dragging the performance of
the organization. When there is poor cost control, it also means there is inadequate supervision
of workers hence employees can use the resources of the organization anyhow they like
without anyone monitoring them and this obviously reduces the performance. Operational
performance includes the aligning of different strategic business units (SBU) of the
organization and their activities to make sure that the SBUs are contributing to the
achievement of organizational goal and thus, decrease in operational performance can be as a
result of cost control (Akenbor & Agwor, 2015).
(Abdul & Isiaka, 2015), weak cost control techniques have effects on the performance of a
business as it affects its profitability. Profits go a long way to determine what constitutes the
financial position of a firm. Thus, cost control techniques must be effective so that costs will
not be allowed to exceed tolerable levels, otherwise profitability would be affected and where
profitability is affected, expansion and operational performance also becomes difficult. (Abdul
& Isiaka, 2015).
2.8
Empirical Literature Review
Various research studies were carried out on cost control measures and their impact on
profitability. (Siyanbola & Raji, 2013) on their study of the impact of cost control on
21
manufacturing industries’ profitability. Findings from their research showed that cost control
has a significant and positive impact on profitability of manufacturing companies in Nigeria.
In their research budget was considered as the basic tool for achieving effective cost control
and their study was conducted in West Africa, on West African Portland Cement Company
(WAPCO) and made use of Pearson correlation for data analysis. Questionnaires were used as
research instruments.
Akeem (2017) study on the effect of cost control and cost reduction techniques in
organizational performance, findings revealed that there is a direct relationship between cost
control, reduction and profit. Thus, the study concluded that for an organization to ensure
more profit growth, there is need to control and reduce cost to an acceptable limit. A
descriptive survey research was adopted. Questionnaires were used as research instruments.
Also, (Abdul & Isiaka, 2015) study on the relationship between cost management and
profitability, a study of selected manufacturing firms concluded that the relationship between
cost management and profitability is statistically significant. Questionnaires were randomly
distributed to manufacturing companies in Nigeria and data collected were analyzed using
descriptive and non-parametric statistics.
However, Adeleke (2014) study on the Cost management techniques and performance of
Nigerian banks as cited by Abdul and Isiaka (2015), findings concluded that the relationship
between cost control techniques and profitability were not statistically significant. Secondary
data was used and data were analyzed with the use of descriptive statistics.
22
2.9 Summary
The purpose of this chapter is to bring together as one piece of information other scholarly
material concerning impact of cost control on profit maximization. The researcher looked at
the objective of cost control, the requirements needed to ensure an effective cost control
system, examined cost control techniques that are involved in the cost control process and the
effects of implementing weak cost control techniques. The next chapter presents research
methodology
23
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
In this chapter the researcher presented the methodology or procedure to be followed to realize
the research objectives. The subsections which will present in this chapter include: research
design, population and sample techniques, research instrument as well as data analysis technique
and Ethical Consideration.
3.1 Research Design
(Rajasekar, 2006) defined research design as a conceptual structure within which a research is
conducted and it is a plan which starts with formulation of definite and unambiguous research
objectives, organized methods of data collection and a clear choice of the population and
samples to be studied.
(Almalki, 2016) Described research design as a process that helps in planning the how, when and
where of information collection and analysis. Descriptive research design and Explanatory
research design are some of the major types of research design (Almalki, 2016).
The study will adopt the descriptive research design with the aim to give a descriptive position
on the subject matter of the impact of cost control on profit maximization. The descriptive
approach enabled the researcher to gather information in such a way that was going make it
easier to understand problems affecting manufacturing companies in order to come up with
effective solutions to increase profitability. Also, the descriptive research design encompasses
interviews and questionnaires providing information which determined the nature of the situation
at the time of research. Also, the researcher had no control over the variables and could only
report what happened or what was happening.
24
3.2 Study Population
According to (Alvi, 2016) defined a targeted population as the group of individuals regarded as
relevant to the research study. Target population refers to all the members who meet the
particular criterion specified for a research investigation and the selected individuals assist in
coming up with a research conclusion, making use of data collection methods (Alvi, 2016)
(Saunders, 2007) defined a population as any group of individuals, organizations, social
interactions and events and it is a group of elements exhibiting more or less similar
characteristics from which a sample to work with in a research is derived. The targeted
population for the research constituted SOMALI PLASTIC COMPANY and ONKOD
MOBILYA. departments which were directly linked to cost control, which are Finance, Sales
and Marketing, Human Resource, Production and Processing department, Quality control and
Product and development department.
3.3 Sampling Techniques
3.3.1 Sample Size
Part of the target population (or accessible) population that has been procedurally select to
represent it. Although the number of populations was known the sample size and isn't necessary
to draw sample size because its accessible and interview every one of these target population
(Alvi, 2016).
The target populations for this study were 55 from some selected manufacturing companies in
Mogadishu Somalia and the sample size was 48 respondents only. The sample size was
determined by using Slovene’s formula which is:
n=
Where:
N
=
Total Population
n
=
Sample size
e = is the confidence level at 0.05
Substituting into the formula,
25
n=
n=
n=
n=
n = 48
Therefore
n = 48 respondents.
3.4 Research Instruments
(Birmingham & Wilkinson, 2003) Defined research instruments as devices used to gather
information relevant to a research project. Research instruments selected by the researcher, have
a huge bearing on the relevance and reliability of information to be produced and they include
questionnaire and interviews (Birmingham & Wilkinson, 2003).
The researcher used questionnaires as research instruments to obtain primary data.
A questionnaire is document containing a set of questions, especially one addressed to a
statistically significant number of subjects as a way of gathering information for a survey
(Birmingham & Wilkinson, 2003) According to (Saunders, 2007) a questionnaire is a set of
questions working and a sequence of presentation as well as more or less precise indication of
how to answer each question. It is a common place instrument for conserving data beyond the
physical reach of the observer. Questionnaires can be structured and unstructured. The
researchers made use of questionnaires with both closed and open-ended questions and they were
given to respondents in the population.
3.5 Data Collection Method
Questionnaires were given to participants in the departments of SOMALI PLASTIC COMPANY
and ONKOD MOBILYA, making use of the drop and pick technique. For questionnaire to back
in time appointments will make with the participants in the departments, followed by a follow up
to respondents to see if they experienced any challenges in answering the questionnaires.
26
Participants which were constitute the population were forty-eight (48) employees from
SOMALI PLASTIC COMPANY and ONKOD MOBILYA departments and therefore the
researchers obtain reliable information from the population concerning the impact of cost control
on profit maximization.
3.6 Data Quality Control
3.6.1 Validity
(Brink, 2011) said that validity in research is much concerned with the accuracy and truthfulness
of scientific findings. A validity study should show what actually exists and a valid instrument
should actually measure what it is supposed to measure ( (Brink, 2011)
According to (Thanasegaran, 2012) validity determines whether the research truly measures that
which it was intended to measure or how truthful the research results are. A research instrument
is valid if it accurately measures what it is supposed to measure without being diluted by other
factors.
Inadequacies leads to serious consequences on the whole research outcome hence it must not be
taken lightly
(Thanasegaran, 2012). The researcher made use of research objectives and
questions during the creation process of questionnaires and the interview guides thus ensuring
the validity of the research instruments. Research instruments used were examined to ensure that
the questions sought for the information which was related to the problem understudy and this
ensured validity.
27
3.6.2 Reliability
(Thanasegaran, 2012) defined reliability as the extent to which information is considered free
from error and therefore yields accurate results. Information is considered reliable if research
instruments will obtain the same results concerning the same subject of matter after being used
by different researchers ( (Thanasegaran, 2012) . (Brink, 2011) said that reliability aims to reduce
errors in the data gathered. It refers to the ability to consistently yield the same results when the
same measurements were repeated on the sample under study and under the same conditions
(Brink, 2011).
Since the study was conducted at a private institution where respondents are afraid to avail
confidential information for reasons such as fear of competitors. The researchers made an
arrangement for a drop box where respondents would drop unsigned questionnaires upon
completion to secure the anonymity of the respondents. Also, research instruments used ensured
the reliability of data as structured interview questions where used in order to exhaust all areas of
concern. Questions were designed to cover the aspects of the objectives of every objective.
Respondents will be given questionnaires in the morning before they got exhausted with their
work so as to minimize the risk of errors.
3.7 Data process and Analysis
According to (Walton N. , 2013), data analysis a systematic process which involves the application
of statistical and logical methods to describe, evaluate and illustrate data so that appropriate
conclusions will be given.
Data from questionnaires was compiled and coded into a coding sheet and will be analyzed using
a computerized data analysis package known as Statistical Package for Social Science (SPSS)
20.0. To analyzing objectives the researcher will use Descriptive statistics that include range,
quartile deviation, standard deviation and variance to describe a group of subjects in the
questionnaire each selected one to five scale where, 1=agree 2=strongly agree 3=Neutral
4=disagree 5=strongly disagree.
28
3.8 Ethical Considerations
In this study the researcher should kept on the ethical issues through the research project by
keeping the privacy, confidentiality and anonymity of respondents. To maintain ethical issue, the
researcher will request from companies’ administration the permission to distribute
questionnaires to their employees telling them that the information will be used only for
academic purpose. The researcher will keep the privacy, confidentiality and anonymity of
respondents. The researcher’s promise that this research will conduct fully ethically and all
copyrights is reserved.
29
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND DISCUSSION OF
FINDINGS
4.0 Introduction
This chapter focuses on the data presentation, analysis and interpretation. The gathered data is
presented using tables, pie charts and bar graphs. The presented data is then analyzed and
conclusions are made based on the mode.
1
4.1 Demographic Responses
Table 4.1.1 Gender Respondents
Frequency Percent
Valid
Cumulative
Percent
Percent
Male
31
64.6
64.6
64.6
Female
17
35.4
35.4
100.0
Total
48
100.0
100.0
Table 4.1.1 and Figure 1.1.1 shows that there were (31 or 64.6%) of the respondents of the
questionnaire are Male, while the female dominated by (17 or 35.4%) respondents. The most
observation for the Gender Respondents are Male which is 31 while Female is 17.
Figure 4.1.1 Gender Respondents
Percentage
35%
65%
Male
Female
30
Table 4.1.2 Marital Status
Frequency Percent Valid Percent Cumulative
Percent
Single
13
27.1
27.1
27.1
Married
29
60.4
60.4
87.5
Divorced
6
12.5
12.5
100.0
Total
48
100.0
100.0
Figure 4.1.2 Marital Status
Table 4.1.2 and Figure 4.1.2 shows the marital status of the respondents. (13 or 27.1%) of the
total respondents are single, (29 or 60.4%) are Married and (6 or 12.5%) are Divorced.
Frequency
35
30
25
20
15
10
5
0
single
Married
Divorced
31
Table 4.1.3 Age
Frequency Percent
Valid Percent Cumulative
Percent
18-27 years
6
12.5
12.5
12.5
28-37 years
15
31.3
31.3
43.8
38-47 years
14
29.2
29.2
72.9
48-57 years
11
22.9
22.9
95.8
58 years and above
2
4.2
4.2
100.0
Total
48
100.0
100.0
Table 4.1.3 and Figure 4.1.3 indicates that there are (6 or 12.5%) of respondents’ age was
between (18-27) years old, around (15 or 31.3%) of the respondents was between (28-37) years
old, (14 or 29.2%) of respondents’ age was between (38-47) years old, (11 or 22.9%) of
respondent’s age was between (48-57) years old, and (2 or 4.2%) was 58 and above years old.
Figure 4.1.3 Age
Frequency
16
14
12
10
8
6
4
2
0
18-27 years
28-37 years
38-47 years
48-57 years
58 years and
above
32
Table 4.1.4 Level of Education
Frequency Percent
Valid Percent Cumulative
Percent
Secondary
7
14.6
14.6
14.6
Diploma
12
25.0
25.0
39.6
Bachelor
21
43.8
43.8
83.3
Master
5
10.4
10.4
93.8
Other
3
6.3
6.3
100.0
Total
48
100.0
100.0
Table 4.1.4 and Figure 4.1.4 indicates that there were almost (7 or 14.6%) of the respondents
were Secondary level, about (12 or 25.0%) of the respondents have Diploma, (21 or 43.8%) of
the respondents were Bachelor degree, (5 or 10.4%) of the respondents are Master degree, (3 or
6.3%) of the respondent are others.
Figure 4.1.4 Level of Education
Frequency
25
20
15
10
5
0
Secondary
Diploma
Bachelor
Master
Other
33
Table 4.1.5 Experience
Frequency Percent
Valid Percent Cumulative
Percent
Less than a year
8
16.7
16.7
16.7
1-2 years
17
35.4
35.4
52.1
3 and above years
23
47.9
47.9
100.0
Total
48
100.0
100.0
Table 4.1.5 and Figure 4.1.5 shows that the work experience of the respondents. (8 or
16.7%) of the respondents less than a year, (17 0r 35.4%) of the respondents between
1-2 years, and (23 or 47.9%) of the respondents are 3 above years.
Figure 4.1.5 Experience
Frequency
25
20
15
10
5
0
Less than a year
1-2 years
3 and above years
34
4.2. DATA PRESENTATION AND ANALYSIS
This section presents the analysis of the data that collected in questionnaires in relation to the
research objectives. The respondents were asked questions related to the objectives and their
responses were analysed.
Table 4.2.1 Manufacturing sector’s performance is being affected by very high cost
of production and operational costs.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
23
47.9
47.9
47.9
Strongly agree
14
29.2
29.2
77.1
Neutral
4
8.3
8.3
85.4
Disagree
5
10.4
10.4
95.8
Strongly disagree
2
4.2
4.2
100.0
Total
48
100.0
100.0
Table 4.2.1 and Figure 4.2.1 shows that the Manufacturing sector’s performance is being
affected by very high cost of production and operational costs. (23 or 47.9%) of the
respondents were chosen “Agree” about the statement written above, (14 or 29.2%) of the
respondents are “Strongly agree”, (4 or 8.3%) of the respondents are “Neutral” , (5 or 10.4%)
of the respondent are “Disagree”. and (2 or 4.2%) are strongly disagree.
Figure 4.2.1 Manufacturing sector’s performance is being affected by very high cost
of production and operational costs.
Frequency
30
20
10
0
Agree
Strongly
agree
Neutral
Disagree
Strongly
disagree
35
Tables 4.2.3 Cost reduction and Cost control are important to an organization as
they help to regulate and reduce unwanted expenses.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
25
52.1
52.1
52.1
Strongly agree
13
27.1
27.1
79.2
Neutral
3
6.3
6.3
85.4
Disagree
4
8.3
8.3
93.8
Strongly disagree
3
6.3
6.3
100.0
Total
48
100.0
100.0
Table 4.2.3 and Figure 4.2.3 shows that the Cost reduction and Cost control are important
to an organization as they help to regulate and reduce unwanted expenses. (25 or 52.1%) of
the respondents were chosen “Agree” About the statement written above, (13 or 27.1%) of the
respondents are “Strongly agree”, (3 or 6.3%) of the respondents are “Neutral”, (4 or 8.3%) of
the respondents are “Disagree”. and (3 or 6.3%) are strongly disagree.
Figures 4.2.3 Cost reduction and Cost control are important to an organization as
they help to regulate and reduce unwanted expenses.
Frequency
30
20
10
0
Agree
Strongly agree
Neutral
Disagree
Strongly
disagree
36
Table 4.2.4 Reducing costs directly reflect an increase in the level of profits of an
organization
Frequency Percent
Valid Percent Cumulative
Percent
Agree
27
56.3
56.3
56.3
Strongly agree
15
31.3
31.3
87.5
Neutral
4
8.3
8.3
95.8
Disagree
1
2.1
2.1
97.9
Strongly disagree
1
2.1
2.1
100.0
Total
48
100.0
100.0
Table 4.2.4 and Figure 4.2.4 shows that the Reducing costs directly reflect an increase in the
level of profits of an organization. (27 or 56.3%) of the respondents were chosen “Agree”
About the statement written above, (15 or 31.3%) of the respondents are “Strongly agree”, (4
or 8.3%) of the respondents are “Neutral”, (1 or 2.1%) of the respondent are “Disagree”. and (1
or 2.1%) are strongly disagree.
Figure 4.2.4 Reducing costs directly reflect an increase in the level of profits of an
organization
Frequency
30
25
20
15
10
5
0
Agree
Strongly agree
Neutral
Disagree
Strongly
disagree
37
Table 4.2.5 Cost control increases chances of an organization to sale its products at a
lower rate than its competitors.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
18
37.5
37.5
37.5
Strongly agree
21
43.8
43.8
81.3
Neutral
5
10.4
10.4
91.7
Disagree
2
4.2
4.2
95.8
Strongly disagree
2
4.2
4.2
100.0
Total
48
100.0
100.0
Table 4.2.5 and Figure 4.2.5 shows that the Cost control increases chances of an
organization to sale its products at a lower rate than its competitors. (18 or 37.5%) of the
respondents were chosen “Agree” About the statement written above, (21 or 43.8%) of the
respondents are “Strongly agree”, (5 or 10.4%) of the respondents are “Neutral”, (2 or 4.2%) of
the respondent are “Disagree”. and (2 or 4.2%) are strongly disagree.
Figure 4.2.5 Cost control increases chances of an organization to sale its products at
a lower rate than its competitors
Frequency
35
30
25
20
15
10
5
0
Agree
Strongly agree
Neutral
Disagree
38
Table 4.2.6 Cost control relies heavily on the existence of a sound and effective cost
control system.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
25
52.1
52.1
52.1
Strongly agree
15
31.3
31.3
83.3
Neutral
6
12.5
12.5
95.8
Disagree
1
2.1
2.1
97.9
Strongly disagree
1
2.1
2.1
100.0
Total
48
100.0
100.0
Table 4.2.6 and Figure 4.2.6 shows that the Cost control relies heavily on the existence of a
sound and effective cost control system. (25 or 52.1%) of the respondents were chosen
“Agree” About the statement written above, (15 or 31.3%) of the respondents are “Strongly
agree”, (6 or 12.5%) of the respondents are “Neutral”, (1 or 2.1%) of the respondent are
“Disagree”. and (1 or 2.1%) are strongly disagree.
Figure 4.2.6 Cost control relies heavily on the existence of a sound and effective cost
control system.
Frequency
35
30
25
20
15
10
5
0
Agree
Strongly
agree
Neutral
Disagree
39
Table 4.2.7 the elimination of wastes and non-value adding activities during
production aids to costs reduction
.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
22
45.8
45.8
45.8
Strongly agree
17
35.4
35.4
81.3
Neutral
5
10.4
10.4
91.7
Disagree
2
4.2
4.2
95.8
Strongly disagree
2
4.2
4.2
100.0
Total
48
100.0
100.0
Table 4.2.7 and Figure 4.2.7 shows that the elimination of wastes and non-value adding
activities during production aids to costs reduction. (22 or 45.8%) of the respondents were
chosen “Agree” About the statement written above, (17 or 35.4%) of the respondents are
“Strongly agree”, (5 or 10.4%) of the respondents are “Neutral”, (2 or 4.2%) of the respondent
are “Disagree”. and (2 or 4.2%) are strongly disagree.
Figure 4.2.7 the elimination of wastes and non-value adding activities during
production aids to costs reduction
Frequency
6%
4%
25%
15%
Agree
Strongly agree
Neutral
50%
Disagree
Strongly disagree
40
Table 4.2.8 to what extent do you agree that companies should carryout educational
awareness on cost control issues?
Frequency Percent
Valid Percent Cumulative
Percent
Agree
14
29.2
29.2
29.2
Strongly agree
31
64.6
64.6
93.8
Neutral
2
4.2
4.2
97.9
Disagree
1
2.1
2.1
100.0
Total
48
100.0
100.0
Table 4.2.8 and Figure 1.2.8 shows to what extent do you agree that companies should
carryout educational awareness on cost control issues? (14 or 29.2%) of the respondents
were chosen “Agree” About the statement written above, (31 or 64.6%) of the respondents are
“Strongly agree”, (2 or 2.4%) of the respondents are “Neutral”, (1 or 2.1%) of the respondent are
“Disagree”.
Figure 4.2.8 To what extent do you agree that companies should carryout
educational awareness on cost control issues?
Frequency
35
30
25
20
15
10
5
0
Agree
Strongly agree
Neutral
Disagree
41
Table 4.2.9 Cost containment is suitable for costs which are induced by internal
factors to the organization.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
26
54.2
54.2
54.2
Strongly agree
12
25.0
25.0
79.2
Neutral
6
12.5
12.5
91.7
Disagree
2
4.2
4.2
95.8
Strongly disagree
2
4.2
4.2
100.0
Total
48
100.0
100.0
Table 4.2.9 and Figure 4.2.9 shows that Cost containment is suitable for costs which are
induced by internal factors to the organization. (26 or 54.2%) of the respondents were
chosen “Agree” About the statement written above, (12 or 25.0%) of the respondents are
“Strongly agree”, (6 or 12.5%) of the respondents are “Neutral”, (2 or 4.2%) of the respondent
are “Disagree”. and (2 or 4.2%) are strongly disagree.
Figure 4.2.9 Cost containment is suitable for costs which are induced by internal
factors to the organization.
Frequency
24
12
AGREE
7
STRONGLY AGREE
NEUTRAL
3
2
DISAGREE
STRONGLY
DISAGREE
42
Table 4.2.10 Cost controls have a significant influence on profit maximization.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
19
39.6
39.6
39.6
Strongly agree
17
35.4
35.4
75.0
Neutral
5
10.4
10.4
85.4
Disagree
4
8.3
8.3
93.8
Strongly disagree
3
6.3
6.3
100.0
Total
48
100.0
100.0
Table 4.2.10 and Figure 4.2.10 shows that Cost control have a significant influence on profit
maximization. (19 or 39.6%) of the respondents were chosen “Agree” About the statement
written above, (17 or 35.4%) of the respondents are “Strongly agree”, (5 or 10.4%) of the
respondents are “Neutral”, (4 or 8.3%) of the respondent are “Disagree”. and (3 or 6.3%) are
strongly disagree.
Figure 4.2.10 Cost controls have a significant influence on profit maximization.
Frequency
25
20
15
10
5
0
Agree
Strongly
agree
Neutral
Disagree
Strongly
disagree
43
Table 4.2.11 Cost control is used as a measure in facilitating corporate profitability
and performance of an organization
Frequency Percent
Valid Percent Cumulative
Percent
Agree
24
50.0
50.0
50.0
Strongly agree
15
31.3
31.3
81.3
Neutral
5
10.4
10.4
91.7
Disagree
3
6.3
6.3
97.9
Strongly disagree
1
2.1
2.1
100.0
Total
48
100.0
100.0
Table 4.2.11 and Figure 4.2.11 shows that Cost control is used as a measure in facilitating
corporate profitability and performance of an organization. (24or 50%) of the respondents
were chosen “Agree” About the statement written above, (15 or 31.3%) of the respondents are
“Strongly agree”, (5 or 10.4%) of the respondents are “Neutral”, (3 or 6.3%) of the respondent
are “Disagree”. and (1 or 2.1%) are strongly disagree.
Figure 4.2.11 Cost control is used as a measure in facilitating corporate profitability
and performance of an organization
Frequency
30
25
20
15
10
5
0
Agree
Strongly agree
Neutral
Disagree
Strongly disagree
44
Table 4.2.12 Cost control helps to compare the performance of one company with of
another in the same industry.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
17
35.4
35.4
35.4
Strongly agree
22
45.8
45.8
81.3
Neutral
6
12.5
12.5
93.8
Disagree
2
4.2
4.2
97.9
Strongly disagree
1
2.1
2.1
100.0
Total
48
100.0
100.0
Table 4.2.12 and Figure 4.2.12 shows that Cost control helps to compare the performance of
one company with of another in the same industry. (17 or 35.4%) of the respondents were
chosen “Agree” About the statement written above, (22 or 45.8%) of the respondents are
“Strongly agree”, (6 or 12.5%) of the respondents are “Neutral”, (2 or 4.2%) of the respondent
are “Disagree”. and (1 or 2.1%) are strongly disagree.
Figure 4.2.12 Cost control helps to compare the performance of one company with
of another in the same industry.
Frequency
30
25
20
15
10
5
0
Agree
Strongly agree
Neutral
Disagree
Strongly disagree
45
Table 4.2.13 every employee should be involved in suggesting cost control initiatives
within the department.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
12
25.0
25.0
25.0
Strongly agree
27
56.3
56.3
81.3
Neutral
7
14.6
14.6
95.8
Disagree
1
2.1
2.1
97.9
Strongly disagree
1
2.1
2.1
100.0
Total
48
100.0
100.0
Table 4.2.13 and Figure 4.2.13 shows that Every employee should be involved in suggesting
cost control initiatives within the department. (12 or 25.0%) of the respondents were chosen
“Agree” About the statement written above, (27 or 56.3%) of the respondents are “Strongly
agree”, (7 or 14.6%) of the respondents are “Neutral”, (1 or 2.1%) of the respondent are
“Disagree”. and (1 or 2.1%) are strongly disagree.
Figure 4.2.13 every employee should be involved in suggesting cost control
initiatives within the department.
Frequency
25
20
15
10
5
0
Agree
Strongly
agree
Neutral
Disagree
Strongly
disagree
46
Table 4.2.14 the impact of weak cost control techniques is identified as increase in
the labor cost.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
11
22.9
22.9
22.9
Strongly agree
32
66.7
66.7
89.6
Neutral
3
6.3
6.3
95.8
Disagree
2
4.2
4.2
100.0
Total
48
100.0
100.0
Table 4.2.14 and Figure 4.2.14 shows The impact of weak cost control techniques is
identified as increase in the labor cost. (11 or 22.9%) of the respondents were chosen “Agree”
About the statement written above, (32 or 66.7%) of the respondents are “Strongly agree”, (3
or 6.3%) of the respondents are “Neutral”, (2 or 2.4%) of the respondent are “Disagree”.
Figure 4.2.14 The impact of weak cost control techniques is identified as increase in
the labor cost.
Frequency
35
30
25
20
15
10
5
0
Agree
Strongly agree
Neutral
Disagree
47
Table 4.2.15 Weak cost control techniques have effects on the performance of a
business as it affects its profitability.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
14
29.2
29.2
29.2
Strongly agree
28
58.3
58.3
87.5
Neutral
1
2.1
2.1
89.6
Disagree
2
4.2
4.2
93.8
Strongly disagree
3
6.3
6.3
100.0
Total
48
100.0
100.0
Table 1.2.15 and Figure 1.2.15 shows that Weak cost control techniques have effects on the
performance of a business as it affects its profitability. (14 or 29.2%) of the respondents were
chosen “Agree” About the statement written above, (28 or 58.3%) of the respondents are
“Strongly agree”, (1 or 2.1%) of the respondents are “Neutral”, (2 or 4.2%) of the respondent are
“Disagree”. and (3 or 6.3%) are strongly disagree.
Figure 4.2.15 Weak cost control techniques have effects on the performance of a
business as it affects its profitability.
Frequency
25
20
15
10
5
0
Agree
Strongly agree
Neutral
Disagree
Strongly
disagree
48
Table 4.2.16 Increase in cost without a proportional increase in labor will
automatically reduce operational performance.
Frequency Percent
Valid Percent Cumulative
Percent
Agree
17
35.4
35.4
35.4
Strongly agree
25
52.1
52.1
87.5
Neutral
3
6.3
6.3
93.8
Disagree
2
4.2
4.2
97.9
Strongly disagree
1
2.1
2.1
100.0
Total
48
100.0
100.0
Table 4.2.16 and Figure 4.2.16 shows that Increase in cost without a proportional increase
in labor will automatically reduce operational performance. (17 or 35.4%) of the
respondents were chosen “Agree” About the statement written above, (25 or 52.1%) of the
respondents are “Strongly agree”, (3 or 6.3%) of the respondents are “Neutral”, (2 or 4.2%) of
the respondent are “Disagree”. and (1 or 2.1%) are strongly disagree.
Figure 4.2.16 Increase in cost without a proportional increase in labor will
automatically reduce operational performance.
Frequency
24
12
AGREE
7
STRONGLY AGREE
NEUTRAL
3
2
DISAGREE
STRONGLY
DISAGREE
49
Table 4.2.17 inappropriate use of materials is one of the prime causes of increased
costs, wastage through poor control
Frequency Percent
Valid Percent Cumulative
Percent
Agree
12
25.0
25.0
25.0
Strongly agree
24
50.0
50.0
75.0
Neutral
7
14.6
14.6
89.6
Disagree
3
6.3
6.3
95.8
Strongly disagree
2
4.2
4.2
100.0
Total
48
100.0
100.0
Table 4.2.17 and Figure 4.2.17 shows that Increase in cost without a proportional increase
in labor will automatically reduce operational performance. (17 or 35.4%) of the
respondents were chosen “Agree” About the statement written above, (25 or 52.1%) of the
respondents are “Strongly agree”, (3 or 6.3%) of the respondents are “Neutral”, (2 or 4.2%) of
the respondent are “Disagree”. and (1 or 2.1%) are strongly disagree.
Figure 4.2.17 Inappropriate use of materials is one of the prime causes of increased
costs, wastage through poor control
Frequency
25
20
15
10
5
0
Agree
Strongly agree
Neutral
Disagree
Strongly
disagree
50
4.3 Discussion of Findings
4.3.1 Characteristics of the research respondents
This section presents the background information of the respondents who participated the
collection of primary data of the study. The purpose of this background information was to find
out the characteristics of the respondents and show the distribution of respondents in the study.
The findings of the study shown above in tabular and graphical forms, indicates that the Gender
of 65% of the respondent were male, while other 35% of them were female.
The researchers also show that the age of 12.5% of the respondents between 18-27 years, while
31.3% of them between 28-37 years, 29.2% of them between 38-47 years, 22.9% of them
between 48-57 years and the rest 4.2% are 58 and above years old.
These results show that the most participants who contributed to get the primary data of this
research were middle aged people almost 28-37 years. This indicates that the businesses selected
are mostly operated by middle aged people. The demographical information also shows that
almost 65% of the respondents were male highlighting the activeness of male in manufacturing
companies.
4.3.2 Objectives
4.3.2.1 To understand the objective of cost control
The first objective of the study was to understand the objective of cost control. The results
found from the analysis of the respondents’ answers indicate that 52.1% of the respondents
agreed and 27.1% of the respondents showed that they are Strongly Agree, 6.3% of the
respondents are Neutral, on the other hand 8.3% of the respondent disagreed and also 6.3% of
the respondent are Strongly Disagree that Cost reduction and Cost control are important to an
organization as they help to regulate and reduce unwanted expenses.. The result shows that cost
control is important to organizations.
The researchers’ findings also indicate that 37.5% 0f the respondents agreed that cost control
increases chances of an organization to sale its products at a lower rate than its competitors,
while 43.8% of the respondents showed that they are Strongly Agree, 10.4% of the respondent are
Neutral, on the other hand 4.2% of the respondent disagreed and 4.2% are strongly disagreed that
cost control increases chances of an organization to sale its products at a lower rate than its
competitors, so the result shows that the cost control increases the chances of an organization to
sale its products at a lower rate than its competitors.
51
4.3.2.2 To understand the requirements needed to ensure an effective cost control
system.
The second objective of the research was to understand the requirements needed to ensure an effective
cost control system. the findings come from this answer is that the cost control relies heavily on the
existence of a sound and effective cost control system. The results found from the analysis of the
respondents’ answers indicates that 52.1% of the respondents agreed, and 31.3% of the
respondent answered Strongly Agree that cost control system in manufacturing companies is
seen as an important role in the efficiency and effectiveness of an organization, while 12.5% of
the respondents showed that they are neutral, on the other hand 2.1% of the respondent disagreed
that cost control relies heavily on the existence of a sound and effective cost control system.
4.3.2.3 To examine the relationship between cost control and profit
maximization.
The third objective of the study was to examine the relationship between cost control and profit
maximization. The researchers investigated that 39.6% of the respondents agreed, 35.4% of the
respondents are Strongly Agreed that cost control have a significant influence on profit
maximization., while 10.4% of the respondents showed that they are neutral, 8.3% of the
respondent are Disagree, on the other hand 6.3% of the respondent Strongly disagreed that Cost
control have a significant influence on profit maximization. The findings of this answer indicate
that cost control have a significant influence on profit maximization.
4.3.2.4 To determine the effects of implementing weak cost control techniques.
The fourth objective of the research was to determine the effects of implementing weak cost control
techniques. The researchers investigated that 22.9% of the respondents agreed, 66.7% of the
respondents are Strongly Agreed that The impact of weak cost control techniques is identified as
increase in the labor cost., while 6.3% of the respondents showed that they are neutral and 4.2% of
the respondents disagreed that weak cost control techniques is identified as increase in the labor cost. .
The findings of this answer indicate that weak cost control techniques are identified as increase in the
labor cost.
52
2 CHAPTER FIVE
3 CONCLUSION AND RECOMMENDATION
5.0 Introduction
This chapter gives a summary of previous chapters and conclusion obtained from the findings of
the research study. Recommendations are also provided making use of research findings and
suggestions for further studies are also provided making use of research findings.
5.1 Summary of the Research

Chapter one showed the background to the study, statement of the problem and the
objectives of the study. It highlighted research questions, significance of the study and
assumptions. Also, delimitation of the study, limitation of study, definition of terms
followed and the chapter concluded with the summary.

Chapter two gave a literature review of views and opinions of other scholars. The
researcher reviewed the literature using the research objectives.

Chapter three outlined methods and procedures used to conduct the research. The chapter
was structured as follows: Research design, target population. It also included validity
and reliability of research instruments, ethical consideration and lastly data collection
procedures. Quantitative and Qualitative approaches were used to collect data. Primary
data was obtained from a target population of 30 employees from departments of
Primeseed.co.

Chapter four focused on the data presentation, analysis and interpretation. The gathered
data was presented using tables, pie charts and bar graphs. The presented data was
analyzed and conclusions were made basing on the mode.

Chapter five gave a summary, conclusions and recommendations and suggestion for
further studies.

53
5.2 Conclusion
The study sought to analyze the impact of cost control on profit maximization in manufacturing
companies. An increase in cost which added to reduced profitability in the manufacturing sector
motivated the study.
The research objectives were:
1.
To understand the objective of cost control
2.
To understand the requirements needed to ensure an effective cost control system.
3.
To examine the relationship between cost control and profit maximization.
4.
To determine the effects of implementing weak cost control techniques.
All the research objectives were achieved and it was concluded that cost control have a positive
impact on business profitability as it is clear that profit can be increased by manipulating costs .
It was evident that element of costs such as materials, labor and overhead costs and workers
behavior could be strategically controlled with measures like budgetary control, standard costing
and variance analysis, accounting to achieve higher profit levels. In controlling costs, a good cost
control system is required to minimize costs as wastages are eliminated and inefficiencies
reduced during production and throughout an organization. Also, from the findings, increase in
labor costs, material wastages, increase in repairs and maintenance cost and decrease in
operational performance were the effects of implementing weak cost control techniques.
54
5.3 Recommendations
Findings from the research showed that there is lack of inclusion of lower level employees in the
decision making and initiatives concerning cost control measures. Management should involve
all workers in suggesting cost control initiatives within departments as management alone cannot
control costs and cost control is a recurrent process that requires the support and involvement of
all employees at all times.
Also, companies should carry out awareness campaigns programs on the importance of cost
control within the organization. These meetings and campaigns should be occasionally carried
out monthly or quarterly and importance of cost minimization should be explained to employees.
Findings from the research concluded that the majority of the respondents agreed that companies
should carryout educational awareness on cost control issues.
The researcher recommends a further study on the role budgetary control as a tool to control
costs to aid organization’s competitive advantage. From the research findings, it is argued that
budgets and budgetary control are important in identifying opportunities to minimize costs.
55
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58
APPENDICES
APPENDIX (1) QUESTIONNAIRE
Dear respondents, we are currently doing graduation thesis on bachelor degree at Mogadishu
University in the faculty of economics and management science, department of Accounting as
partial fulfillment towards the completion of the degree. The purpose of this questionnaire is to
discover “The impact of cost control on profit maximization of manufacturing companies in
Mogadishu Somalia”. You have been considered to be one of the respondents due to the
importance of your information for the study. The information you have provided will be kept
and used only for academic purpose and your opinion would be treated confidentially. Thank
you for your time and willingness to share your views on this issue and we hope that you could
complete the questionnaire as honestly and objectively as possible.
SECTION A: DEMOGRAPHIC DATA
Please tick (√) the appropriate box
Gender
Male
Female
Marital status
Single
Married
59
Age
A- 18-27 years
B- 28-37 Years
D- 48-57 years
C- 38-47 Years
E- 58 and above
Level of education
Secondary
Diploma
Bachelor
Master
Other
Experience
A. Less than a year
B. 1 -2 years
C. 3 years and above
SECTION (B): Please mark (√) the appropriate answer to the best of your view
Direction: indicate your best choice by using the rate system below:
1) Agree.
2) Strongly agree.
Objective One:
3) Neutral.
4) Disagree.
5) Strongly disagree
To understand the objective of cost control
1
2
NO
Statement
1
Manufacturing sector’s performance is being affected by very high cost
of production and operational costs.
Cost reduction and Cost control are important to an organization as
2
they help to regulate and reduce unwanted expenses.
3
Reducing costs directly reflect an increase in the level of profits of an
organization.
4
Cost control increases chances of an organization to sale its products at
a lower rate than its competitors.
3
4
5
60
Objective Two: To understand the requirements needed to ensure an effective cost control system
NO Statement
1
2
3
4
5
1
2
Cost control relies heavily on the existence of a sound and effective cost
control system.
The elimination of wastes and non-value adding activities during
production aids to costs reduction.
3
To what extent do you agree that companies should carryout
educational awareness on cost control issues?
4
Cost containment is suitable for costs which are induced by internal
factors to the organization.
NO
Objective Three: To examine the relationship between cost control and profit maximization.
Statement
1
2
3
4
5
1
Cost controls have a significant influence on profit maximization.
2
Cost control is used as a measure in facilitating corporate
profitability and performance of an organization
Cost control helps to compare the performance of one company with
of another in the same industry.
3
4
Every employee should be involved in suggesting cost control
initiatives within the department.
61
Objective Four: To determine the effects of implementing weak cost control techniques.
NO
Statement
1
The impact of weak cost control techniques is identified as increase
in the labor cost.
Weak cost control techniques have effects on the performance of a
2
business as it affects its profitability.
3
Increase in cost without a proportional increase in labor will
automatically reduce operational performance.
4
Inappropriate use of materials is one of the prime causes of increased
costs, wastage through poor control.
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