Strategic cost management practices and organizational performance: A study of manufacturing firms in Nigeria
No Thumbnail Available
Date
2020
Journal Title
Journal ISSN
Volume Title
Publisher
Institute for Global Business Research, Nashville, USA
Abstract
There has been a lot of transformation in the manufacturing industry. The manufacturing
processes are highly automated, multiple product mix strategies are employed, and the nature of
production cost drivers are complex, production costs have increased and market competition
has risen due to market globalization. Therefore, the use of the traditional cost management
system, such as standard costing and predetermined overhead allocation system in the Nigerian
manufacturing industry has proven to be ineffective in product costing, cost management, and
decision making. As a result of these developments, it has become necessary to employ more
refined product costing techniques of Strategic Cost Management. Some of the Strategic Cost
Management methods are Activity-Based Costing, Target Costing, Life Cycle Costing, Balance
Scorecard, and Total Quality Management. The implementation of the Strategic Cost
Management system has led to improved product costing analysis and decision-making,
production efficiency, and improved firm performance and market competitiveness. This study
examines the effect of Strategic Cost Management practices on organizational performance of
Nigerian manufacturing industry. A survey research design is employed to collect primary data,
which are analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM)
method. The study reveals that Strategic Cost Management practices positively impact
organizations’ performance. Therefore, it is recommended that manufacturing firms still using
the traditional costing methods should consider employing the Strategic Cost Management
methods to enhance their performance and competitiveness.
Description
Keywords
Activity-based costing, Life cycle costing, Target costing, Organizational Performance, Strategic Cost Management, Production Costing
Citation
Adigbole, E .A., Adebayo, Arinola O., Osemene, Olubunmi F. (2020). Strategic cost management practices and organizational performance: A study of manufacturing firms in Nigeria. Global Journal of Accounting and Finance, 4 (1), 142 -157.