4.

Proposal On Assessment Of Product Costing And Pricing System

4.1 Background of the Study

 The product costing and pricing is hold the central place in any business
organization. Because the success and feasibility of the business venture will
ultimately be founded on this strategy of the business organization system of
costing and pricing developed. That is mainly because the potential risk and profit
of the company will be taken into account while the concerned company becomes
to engage in the process of setting the cost and price of the same. So that this stage
of setting the cost and price can readily be considered as acritical stage as
compared to the other process need to be undertaken besides setting this price and
cost of the product. 

The effort of trying to undertake the historical investigation of the development of

cost accounting in United Kingdom, was something that given with minimal
attention from the earlier period to twentieth century. Much academic strategy and
archival research has been an influence for development of costing system.

But as time lapses the attention for investigation of this cost accounting becoming
larger and larger. Costing system during the latter part of the 19th century has been
examined in some depth. For example, Boy an and Edward in1974 come to
conclude from their studies of coal that iron and steel company records from that
period there were much sophistication in costing practices, the allocation of over
heads and the integration of cost and financial accounts.

In any business organization, cost accounting is a center of attention as it is avital

tool in the management of the internal affairs of the organization. This cost
accounting involves managers examining past performance and systematically
exploring alternative ways to make better informed decisions in the future. So that
the performance of the business organization will became effective and efficient in
most aspects of the business venture the organization come to involve in. This
means that the productivity of the company enhanced.
  The cost accounting measures and reports the financial and non-financial
statement information that relates to the financial and non-financial statement
information that relates to the post of acquiring or a consuming resource by the
concerned business organization. Any business organization starting from the
smallest sole proprietorship to the largest corporation acquiring knows how and
use cost accounting concept and practice. Because this cost accounting provides
the key data to manager for planning, and engage into activities that necessary to
perform certain business venture, controlling the different aspects of the business
organization and evaluating the decision making and fixing the product price as
well as to know the price. 

The research paper evaluates the process costing & pricing practice and also
provides information like product cost, process cost. Service utility and other
necessary information of Yusuf flour private limited company.

4.2 Statement of the Problem

It is undoubtedly clear that the competitive market situation prevailing in the
country calls for greater examination of the things prevailing around the market.
Therefore the competition that exists within the market will be enhanced. So that
thoughtful moves in many sectors of the economy needs a sort of change to be
introduced. Among many areas, the flour factories are face with the problem of
stiff competition among indigenous as well as foreign producers.
In such circumstances proper management of costs is crucial for the success of
business or failures of business. Some costs will vary with volume while others
remain constant for a current and certain level of activity. The purpose of cost
accounting can be generally be distinguished between the product costing purpose
of a system and other purposes such as planning and control. The cost of
production system ascertains the cost of product and services in regard to primary
objective. However to ascertain the costs of a product will be not enough rather the
business organization require to control cost timely and properly. 
Therefore the study is designed to concentrate on the application of cost
accounting areas to determine the following basic question for Ethiopia plastic
share company
 1. What is the role of cost accounting system of a certain factory?
2. How does each of the production costs recorded in the factory at hand?
3. Would the costing system help in eliminate various wastages in the factory?
4. Does the costing system provide the factory management with useful
information for decision making?
5. Does the company have developed form of cost standards related with cost?
6. Does the system of cost accounting guide the management in the fixation of
selling price?

4.3 Objectives of the study

General objective of the study: the main objective of the study is to assess and
evaluate product costing and pricing system of Yusuf flour private limited
company found in Dilla town. The followings are the specific objectives aim to
accomplish;

a) To examine the costing system and classification of cost in Yusuf flour

factory.

b) To assess how direct material, Direct labor and manufacturing overhead

costs are recorded

c) To assess the accounting treatment for spoilage and scrap

d) To examine whether there is a timely preparation of cost report for decision

making

e) To examine if the company have cost standards

f) To see whether costing methodology is used as a guide for pricing decision.
4.4 Research Design and Methodology
The study used different methodology as a means of data collection, analysis and
report preparation to undertake the things this study meant to attain.. The study
selected the sample for data collection from the management of the company and
cost accounting staff.
4.4.1 Data Collection
The researcher made use of both primary and secondary data collection to evaluate
and assess the accounting system of this factory. The primary data was the one
which was obtained from sources inside the company using interview for the
management as well as accounting staff. On the other hand, secondary data was
obtained from annual reports, cost manuals and journals.
4.4.2 Data Analysis
In the data analysis stage the researcher used tabulation as well as graphical
techniques to evaluate the various data obtained during the data collection stage

4.4.3 Data interpretation and Recommendation

The final findings of the study are presented in report format and contain text as
well as some formats used in the system. In addition some techniques that can be
used in implantation of a proper costing system will used in this report under
consideration.
4.5 Scope of the Study
The study focused on the production costing system in this factory. The study did
not want to engage into detail of the other accounting aspect of the factory unless it
is related to the costing implications. The study emphasize on manufacturing cost
(material, labor and overhead) In addition the study covers some important aspects
which should be considered in setting proper prices in selling products and its
application in Ethiopia plastic share company.
4.6 Significance of the Study
Studying the costing system and its application vice versa the theoretical review
will be important. The study has the following importance. First in doing the
research improves the system of setting cost and price in this factory as the study
cater to look into the practical problem exists in this factory. This will in turn set a
sort of effective and efficient form of developing cost and price setting mechanism
in any factory like the one the study is dealing with. Secondly recommendations
will be given at the end will help the organization to improve its inefficiencies. and
finally, the research work can serve as starting point for further research on the
same topic.
4.7 Limitation of the Study
The research study was not free from limitation. There were some issues which
has hindered the attainment of the study objectives stated under the objectives of
the study. Some limitation that the writer will face is shortage of time which deters
the writer possibility not to assess all aspect of the company operations which
resulted from not to get the desired information or lack of adequate information
from the appropriate respondents or other source of information. The research
work was also unable to get some information which the company kept it
confidential that it is reserved from the research presentation.
4.8 Organization of the Study
There are four chapters included in the study. The first chapter contains the
proposal of the study at hand. The second chapter presents the literature review of
cost and cost accounting. The third chapter includes the result and discussion and
finally summary conclusion and recommendation is stated in the fourth chapter.