CHAPTER ONE
INTRODUCTION
- 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.
- 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.
- 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.
