Effectiveness Of Pricing Policy Manufacturing Industries

Introduction

1.1 Background to the Study

The economy which was one agriculture oriented is now largely into manufacturing our metaphosing into a more dynamic and diversified one. In essence, since the manufacturing industry is concerned with the production of finish goods, their absence is no exception as catalyst for the fast transformation of the country"s economy to manufacturing economy should be encourage for the tremendous contribution to the growth I can be give to the country. The growth of the costing started during the industries revolution in 1780AD and this was applied on the manufacturing activities of the small scale and medium scale business managed by individual shortly after, there was the need for the manufacturing industry to know their cost analysis involved in producing a particular goods or services to achieve the price at which the industry (manufacturing will sell it out to the consumer, thereby applying the costing principle necessary).

"Probably no single marketing tool is so critical from both economy and social stand point as price. Yet, as important as it is less is probably know about any other single market tool".

(Buskirle 2001). Therefore should be a proper and effective method at arriving at actual expense should be a proper and effective method at arriving at actual expense (Direct Material Cost, Direct labour cost, overhead expenses and others indirect cost) on a production produced in an industry. The industry is bound to collapse, or continue to be run ineffectively if proper costing method is not that in place.

Any decision process requires the implementation of some sort of guide to action. Actual total cost per units produced should be the guide to the price to be fixed on a product in order to maximize profit or gain.

Manufacturing industries ill thereby obtain the most effective use of the economic resources held by the industry. Consumers usually do not decide to buy a commodity without some idea of its make up or characteristic. Similarly, if an industry acquires knowledge of the composition of cost data similarly, if an industry acquires knowledge of the composition of cost data system, they will be in a better position to decide what types to "buy in what situation".

"Since pricing is not an end in itself, but a means to an end, an explicit formulation of the company pricing objective is essential. The fundamental guides to pricing objective and company"s overall goals (Dean 2003). Therefore the researchers was set to carryout as research on effectiveness of pricing policy in the manufacturing industry with a view to funding out the problem faced in determining the prices of products. Some total cost is equal to the fixed cost and variable cost and suggestion on solution to the problems.

1.2 Statement of the Research Problems

The researcher was set to address the following problems.

Persistence/escalating price of inputs constitute, a major problems in determining the poor units price of a commodity, making it difficult to cover the total cost incurred.

Like many other types of problems the pricing decision in manufacturing industry suffers from the lack of accurate and relevant information.

The forces of demand and supply often posses of problem for a firm costing policy in achieving a realistic price, particularly if a firm is a price taker.

In the process of maximizing profit, the manufacturing industries often face the problem of competition.

The position of the manufacturing industry as regards the quality of product cannot complete well with imported goods.

1.3 Objectives of the Study

The primary objective of the study/research was to determine the effectiveness of pricing policy in the Nigeria manufacturing industry.

The secondary objectives are: -

To investigate, the major problems associated with price determination in manufacturing industry.

To ascertain the problems facing the manufacturing industry in the determination of prices of product in respect to foreign exchange needed for raw materials and other imported input.

To recommend ways of effectively determining actual cost of production so that prices can be as reasonably price as possible.

Involvement of methods (costing) effectiveness and how the price (realistically) is arrived at in the sector (manufacturing).

To ascertain when item of cost dominate the other cost in price determination in manufacturing industry.

1.4 Significance of the Study

In this study, the researcher has highlighted some of the numerous glaring importance of having a knowledge and understanding of effective costing for pricing policy in manufacturing industry.

It could help to reduce the complication involved in arriving at pricing policy in manufacturing industry to the understanding of layman.

The study should be understood by all because it is an effort to analyse costing influence in any pricing decision. Since price are of great importance to the general public in their day today activities.

The research was intended to be an effort at determining the role that cost of production plays realistic pricing policy of product in manufacturing industry.

The effect of change in economic polices on the price should be product produced by the public through he result of this research work.

1.5 Research Questions

The focus of this study is to identify the effectiveness of pricing policy in manufacturing industries. Hence, in the course of the study effort has been made to find solution to the followings research question;

What are the effectiveness of pricing policy in the Nigerian manufacturing industries?

What are the problems of manufacturing industries in determining the price of product in respect of foreign exchange needed for raw materials and other imported inputs?

What are the problems associated with price determination in manufacturing industries?

What are the items of cost that dominate other cost in price determination in manufacturing industries?

What are the pricing method for realization of effectiveness pricing policy in manufacturing industries?

1.6 Scope of the Study

The study covered the manufacturing PZ industries Plc as the case study.

PZ industries Plc is a manufacturing of consumable goods. The study also covers the aspect of determining of cost and fixing of price in the area of management accounting and in particularly cost accounting.

1.7 Limitation of the Study

There will be definitely be problems encountered in the course of any study embark upon. Some of the problems encountered are: -

LACK OF CO-OPERATION FROM RESPONDENTS: Some respondents find it difficult to make information readily available to the researcher due to the natures of competition in the manufacturing industry today which calls for absolute secrecy in terms of method of pricing within the sector.

TIME CONSTRAINT: The researcher was faced with the problem of not having sufficient time to cover the research (as intended) due to the present day crash programming nature of the educational system.

The researchers problem of finding relevant literature, journal, and newspaper e.t.c. related to the research topic must be mentioned.

Despite all the problems encountered the data collected is very authentic to the research.

1.8 Plan and Organisation of the Study

This research work has been divided into five chapters for easy presentation of the fact and figure gathered.

Chapter one contains the introduction statement of research problem, aims and objectives, significance of the study, research questions, scope and limitation, plan and organisation of the study and definition of key time.

Chapter two will treated past and current literature review which include product costing, flow of cost, pricing decision cost plus pricing system, objectives of pricing policy, pricing control and rationing and general pricing problems.

Chapter three will highlight research methodology and historical background of case study. Research methodology include method of data collection, population and sample size, sampling technique and method of data analysis.

Chapter four will discuss the presentation and interpretation of data while involve discussion of analysis and discuss of findings.

Chapter five throw light in the summary, conclusion and recommendation.

1.9 Definition of Key Terms

The following terms relate to the research topic.

1. Effectiveness:

Is producing the intended result aims thereby making a striking impression.

2. Costing:

Is a systematic method or way of arriving at actual expense (direct material cost, direct labour cost, overhead expenses are other indirect cost) on a product by a manufacturer or company.

3. Pricing:

Amount of money to be paid based on facts after everything required has been taking into consideration.

4. Pricing Policy:

Is the procedure on method of fixing to ascertaining and determine the price of a product in commodity in organisation.

5. Manufacturing Industries:

Institution involved in converting raw material into finished goods in which is finally use by the final consumers.

6. Direct Marginal Cost:

The raw material that becomes an integral part of the finished product are significant enough to war out tracing them from material to finished goods.

7. Product Cost:

What are closely associated with units produced by a manufacture or produced for resale by a retailer. Products costs are assigned to inventory when incurred and expressed are expensed when it time to which they are assigned are sold.

Summary, Conclusion and Recommendation

5.1 Summary

The research topic is effectiveness of pricing policy in manufacturing industries, a case study of P.Z Industry Plc. It is right to start by looking into evolution of the manufacturing industries and the growth of pricing policy in its contribution to the economic growth of the country.

The manufacturing industry is an industry concerned with the production of finished goods. Its raw state or semi processed state. The researcher study encompasses five chapters and takes care of the research topic as regard its effect on the day to day activities and industries in general.

Chapter one which (includes the introduction, statement of the problem, objectives of the study, significance of the study, scope of study, limitation of the study and definition of related terms) explains the impact manufacturing industries on the Nigeria economy.

Customer usually do not decide to buy a commodity without some ideas of its make-up or characteristics and this in essence has to deal with the consideration of effectiveness pricing to make-up recent conclusion as regards the importance or necessity of product in question. This chapter is in introduction to the research project and all general requirement of the research.

Chapter two is the review where all relevant works to the project topic viewed. The view on this chapter is pricing decision suffers from lack of accurate and relevant information. Selling prices depend basically on supply and demand should therefore be based on such economic consideration rather than cot for these reasons, there has to be policies in an industry which should be a guideline to setting realistic price for product, although the policies should not be arriving at a period. Cost has been taken into consideration in arriving at a final cost and this would have to be kept in paper records.

Chapter three - the chapter presents the research methodology which enables the research project to be analysed. Using 1 respondent from the population of the study. The method employed in to order to ease the complexity on pricing policy decision.

Chapter four - the chapter is on data analysis. It is explicitly and drawn out in such a way that the interviews are explained with the responses gathered from the respondents with the questions. Before setting price any price, cost price should be reasonable and not too high. Certain factors are necessary for consideration for cost of production to arrive at a final realistic and all these have been analysed in this chapter.

Finally, pricing policy in a manufacturing industry varies in relation to industry in question but for proper and realistic pricing to be achieved record has to be achieved record has to be from kept and proper policies should maintain to meet standard requirement.

5.2 Conclusion

On the basis of literature review analysis and interpretation of data, and observation, the following are the findings of the study.

Selling price depends basically on supply and demand and should therefore be based on such economic consideration rather than cost. Both supply and demand have great roles to play in the determination of realistic pricing and not either.

The prices worked out in an industry constitute not only the basic cost of product in but also income of all who participate in production of a manufacturing industry.

Research are development is a necessity before production of a goods or services are embark upon.

Determination of prices in a manufacturing industry our affected and influenced by changes in economic policies.

The stabilization of exchange rate has helped the industry in the sense that cost can be ascertained to some extent.

Motivation of staff is a benefit to the overall quality and quantity of production.

As a result of this finds, this research report on "Effectiveness of pricing policy in the manufacturing industry" is a recommended to he entire public particularly manufacturing industries.

5.3 Recommendations

Based on the findings of the study the researcher would like to move following specific recommendation.

The industry should have a research and development section which should be responsible for market survey in order to know the customer range of taste and marketable products.

The industry should take proper control over the material usage variances as to reduce wastage of some material.

The industry should not adopt strictly costing principles and techniques so that it reduces its prices.

Every systems requires periodical and skilled to avert he danger of obsolesce due to change and development in the business.

There is need for formulation of policies which will give raise to staff motivation and benefit.

The industry should have clearly defined policies as regard determination of price of its product so that the board of directors need to fix arbitrarily using the cost accountant repot as a basis.

The stabilization of the exchange rate by the present administration in terms of naira to the Dollar will help manufacturing industry in sense that their cost of input can be ascertained to some extent with the regulated rate and with the availability of the foreign exchange being allocated to the manufacturing in such sector of the economy. More so because the input cost will be stabilizer and will result into a more stable price.

Problem of pricing policy determination as a result of exchange in cost of material input (i.e. raw-material to be stored). This will help in keeping a stock overtime, thereby making it easy to price the product on post or expected cost.

Proper pricing on issues of material in stock for production or sales can help in determination of a pricing policy of an industry product(s).

Title Page

Certification

Dedication

Acknowledgement

Table of Contents

Chapter One

Introduction

1.1 Background to the Study

1.2 Statement of the Research Problems

1.3 Objectives of the Study

1.4 Significance of the Study

1.5 Research Questions

1.6 Scope of the Study

1.7 Limitation of the Study

1.8 Plan and Organization of the Study

1.9 Definition of Key Terms

Chapter Two

Literature Review

2.1 Introduction

2.2 Product Costing

2.3 Flow of Cost

2.4 Pricing Decision

2.5 Cost Plus Pricing System

2.6 Objective of Pricing Policy

2.7 Price Control and Rationing

2.8 General Pricing Problem

Chapter Three

Research Methodology

3.1 Historical Background of P.Z Ltd

3.2 Method of Data Collection

3.3 Population And Sample Size

3.4 Sampling Techniques

3.5 Method of Data Analyis

3.6 Method of Data Collection

3.7 Industry Manufacturing

Chapter Four

Data Presentation and Analysis

4.1 Discussion of Analysis

4.2 Discussion of Findings

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary

5.2 Conclusion

5.3 Recommendation

Bibliography

• Accounting Project Topics and Materials