Memoire Online - The use of job costing as a tool for the pricing and cost control decisions in the printing industry: the case of Société de Presse et d'Editions (SOPECAM)

Certification................................................................................................ii

Dedication..................................................................................................iii

Acknowledgement........................................................................................iv

LIST OF TABLES

LIST OF FIGURES

ABSTRACT:

One of the most important challenges to Cameroonian companies today is the strong competition they face due to the free trade agreements and other manifestations of the globalisation of the world's economies. They thus need to adopt effective and efficient management techniques that may help them to comply with the standards required in the world market place.

This study focuses on the application of job costing in the printing industry in Cameroon and specifically at SOPECAM, a Nationalised printing company. It is designed to determine the unit cost of their main product, the newspaper Cameroon Tribune so as to propose a more reliable basis for future pricing decisions in the company and also to analyse the cost structure of the company for its management to take effective measures to control those costs.

During the study, primary data were collected at SOPECAM through the interview of the company executives and secondary data have been gathered from the company accounting records. These data were analysed using the absorption and variable costing techniques and the Student's T-Distribution.

The unit cost of Cameroon Tribune was found to be FCFA 474 and FCFA 325 using absorption and marginal costing respectively, and as such the company should use absorption costing for its pricing decisions and marginal costing for the cost control programmes.

Recommendations concerning the setting up of a managerial accounting department, and for an increase in the selling price of the product have been made.

CHAPTER ONE:

INTRODUCTION

I. BACKGROUND INFORMATION

As Cameroon progressively comes out of he deep economic depression of the 1980's and 1990's, and as we are heading towards the challenges set by the globalisation of the world's economies, there is a pressing need for Cameroonian companies to adapt themselves to the world's accounting and financial standards so that they will be able to compete with their foreign opponents. One of the ways through which these companies could become very competitive is by adopting recognised business practices as part of their procedures for treating and processing data in order to obtain good information that will improve the decisions made by their managers. In fact, the afore-mentioned business practices are the accounting, finance, management and economic tools, methods and techniques presently used in the business world and that are of great importance to the success of any enterprise. These are made up of quantitative as well as qualitative models that are used to analyse business situations and help in the decision-making processes of the companies concerned.

For this study, we will be dealing with the Managerial and Cost accounting standards and principles. Managerial and cost accounting are with financial accounting the three parts of the broad science of Accountancy. While financial accounting is concerned with «The classification and recording of monetary transaction of an entity in accordance with established concepts, principles, accounting standards, legal requirements and presentation of a view of those of transactions during an accounting period.» Lucey^1(*) (1993); Garrison & Noreen^2(*) (2003) defines Managerial accounting as «the phase of accounting concerned with providing information to managers for use in planning and controlling operations and in decision making. Finally, cost accounting is defined by Lucey (1993) as « the establishment of budgets, standard costs, and actual costs of operation, processes, activities or products; and the analysis of variances, profitability on the social use of funds.» Cost accounting is usually designed to help managers control manufacturing and production costs and thus can be see as a subset of managerial accounting. Some other differences can be established between these three divisions of accounting; these differences are based on the kind of information produced by those the accounting information system from the data provided by the each of these accounting divisions.

Cost accounting on its own has the following characteristics concerning the type of information provided:

· These are very current information necessary to evaluate the present situations.

Managerial or management accounting's features relating to the information requirements could be summarised as providing information useful for future strategic planning. Strategic planning being the process of selecting an organisational goal, determining the policies and programmes necessary to achieve en route the goals and establishing the methods necessary to assure that the policies and strategic programmes are implemented. (Stoner & Wankel^3(*): 1986). This is the reason why Horngren^4(*) (1981) states that: «It emphasises the preparation of reports of an organisation for its internal users such as presidents, deans and head physicians.» It is by making use of the information provided by the Management Accounting Information System (MAIS), which is an information system that produces output information using inputs and processes needed to satisfy specific management objectives, that the preparation of reports can be achieved. The afore-mentioned processes are the heart of the MAIS and are used to transform the inputs into outputs that satisfy the firm's objectives. These processes are described by the activities such as collecting, measuring, storing, analysing, reporting and managing information. Outputs include special reports, product costs, customer's costs, budgets, performance reports and even personal communication.

Hansen and Mowen^5(*) (1997) have identified three main objectives of a MAIS, these are:

1. To provide information for costing out services, products, and other objects of interest to management.

From these definitions and characteristics, it appears that a company, apart from taking care to the proper recording and classification of its operations through financial accounting, it must give considerable attention to the monitoring of its various costs of operations. There is therefore a pressing need to devise and adopt objective and accurate costing methods and systems that will provide the company with a reliable figure of its products' unit cost. This is generally the job of the Managerial and Cost accounting departments of the company.

Having spent three months last year at the Cameroon News and publishing Corporation as an intern, we had the time to observe and analyse that company accounting procedures and practices and we realised that the managerial accounting department, though in existence, was not yet operational, leaving the company without the required tools necessary for the company management to appreciate the profitability of each of its products and activities. The Cameroon News and Publishing Corporation, usually known under its French acronym SOPECAM, is a State-owned enterprise specialised in printing works and whose main product is the daily newspaper Cameroon Tribune. As we are interested in the method of objectively costing a company's product and since we are really preoccupied by the survival and growth of the SOPECAM, our main focus will therefore be to determine which costing method or technique is better applicable to this company.

From the literature available in the cost accounting, it has been decided to analyse the possibility of using the Job-order costing method in costing SOPECAM's products. This is because the printing industry is among those that can easily use the job costing method as a mean for costing their products Horngren & Foster^6(*) (1991).

Horngren^7(*) (1999) defines Job costing as a costing system in which the cost of a product or service is obtained by assigning costs to a distinct unit, batch or lot of a product or service. The above definition of job costing makes little difference between job and batch costing; a more concise and specific definition of it is given by the CIMA Terminology^8(*), which considers job costing as a costing method applicable where goods and services result from a sequence of continuous or repetitive operations or processes. This is a product costing method and in product costing we are generally interested in determining the unit cost of a product or service. This unit cost can be particularly helpful for various purposes such as the pricing decisions, planning and control decisions or cost control programmes.

For this study, we will be interested in the usefulness of the unit cost evaluation for the pricing decision, even though many other factors are to be considered when setting the price of a product.

II. STATEMENT OF PROBLEM AND RESEARCH QUESTIONS

The purpose of this study is to devise an objective basis for costing SOPECAM's printing works such as the newspaper Cameroon Tribune and also to set its selling price using the cost information obtained. The main difficulty will concern the allocation and application of the company overheads to the units of production. To perform this task in the right way, we need to have adopted an objective and appropriate costing method such as the job costing method that will help us in this task. The central problem of this study will therefore be to provide the SOPECAM management with reliable and accurate and scientific information about the unit cost of their main product so that they will be able to evaluate the performance of that product and also set a price that will reflect the real situation.

Ø What are the factors that should be taken into account when costing the newspaper Cameroon Tribune?

Ø Finally, how could the results of job costing be used in the pricing and cost control processes?

III. OBJECTIVES OF THE STUDY

This study has as a main objective, the determination of a reliable and precise figure for the unit cost of the newspaper Cameroon Tribune using job costing, so that the pricing process will be conducted on an accurate and objective basis.

The figure will be determined from two approaches: the Marginal and Absorption costing approaches to the job costing method.

Apart from the afore mentioned main objective, there are also objectives of smaller scope such as:

Ø Measuring with great accuracy the amounts of raw materials, labour time and other costs to be used in the production of the newspaper.

Ø Finally, show the importance of a managerial and cost accounting department in a company.

IV. RESEARCH HYPOTHESES

The study being oriented towards the determination of a unit cost using two approaches to the job costing method, that is the marginal and absorption costing approaches, we will therefore be interested in the usefulness of each of these approaches to the pricing process and the company cost control programmes.

The first hypothesis of this study will then assume that any of these approaches can be used for both the pricing process and the cost control programmes without distinction; that is the mean unit cost will be the same for the two methods. This will be the «No difference hypothesis».

The second hypothesis, which is the «Alternative Hypothesis» states that the marginal approach is better for the cost control programmes while the absorption approach provides more accurate and reliable data for the pricing process.

By the end, the results of this study will guide us for the conclusion to adopt as far as these hypotheses are concerned and we will therefore know which of these approaches to use in each situation.

V. SIGNIFICANCE OF THE STUDY

This research work is primarily designed to contribute to the evolution and the wide spreading of universally recognised accounting practices in the Cameroon's business environment; as such we are interested in studying the application and the use of the job costing method in a State-owned printing company, this is because we wish to avoid the occurrence of bankruptcy in another Parastatal printing enterprise as this has been the case with the National Printing Press whose activities are now reduced to their mildest level, because of many factors among which the lack of professionalism.

Concerning the scientific contribution of this research work, this study is aimed at many goals. The first one is the achievement and completion of a research work as the peak to three years of intense training at the University of Buea department of Economics and Management.

Secondly, in conducting this research work, we were interested in studying the public sector of the Cameroonian economy and therefore draw the relevant conclusion as it concerns its chances to succeed in the extremely competitive business environment.

Finally, this study can be particularly helpful as it provides a case study to the use of an accounting principle and thus it can be regarded as a valuable tool for tutorials or illustrations for cost and managerial accounting classes.

CHAPTER TWO:

LITTERATURE REVIEW

The main objective of this chapter as its name suggests is an explanation and a brief exposé of the concepts, studies and theories related to the topic under study. Throughout this chapter we will try as much as possible to give you an insight into the mechanics, processes, procedures and theories related to job costing.

· The results of studies conducted on job costing and the use of other costing methods (Empirical literature).

I. DEFINITION OF IMPORTANT CONCEPTS

These are some of the terms, expressions and words that will be used during the study and as such which need to be carefully analysed and explained so that they will serve as a guide for the good understanding of the topic. These explanations will be divided into two main parts: the first one will focus on the cost terms and the various costs classifications, the second one will be devoted to introducing the reader to the concepts of costing methods and techniques.

A. COST TERMS, CONCEPTS AND CLASSIFICATION.

From the accounting point of view, management main focus and interest is on the costs of the company. For management to be able to plan that is setting objectives and outlining how to attain these objectives, but also to control activities and operations effectively, that is, taking steps to ensure that objectives are realised (Garrison & Noreen, 2003), it must have figures, data and information relating to the costs incurred by the company. These costs are of various types; nature, use and they may be classified using different parameters such as their nature, their function or their behaviour. In order to determine what will be made of any cost data, we must therefore have a good knowledge of its characteristics.

1. Cost

In everyday language, a cost may be defined as «the price to be paid or amount of money to be incurred for something.» This definition seems to be too simple for this study, in a more accounting sense, a cost is defined by Needles, Anderson and Caldwell^9(*) (1981) as the exchange price associated with a business transaction at the point of recognition. This second definition is quite more complete than the previous one but it is still not very accurate and precise. Another expert, namely Lucey (1993) defines the cost, as the amount of expenditure be it actual or notional, incurred on, or attributable to a specified thing or activity.

All these definitions show that costs are measures of what it takes a company or an entity to perform an activity, they measure and evaluate the efforts directed towards the achievement of an objective; this implies that, without information relating to costs we may not be able to evaluate the success or failure of an entity or activity.

2. Cost Objective or cost object.

A cost is used to achieve a certain objective; this objective is termed cost object. It is defined by Garrison and Noreen (2003), as anything for which cost data is desired. That is any activity that requires information about the costs involved in performing that activity. Horngren and Foster (1991) define a cost objective as any activity or item for which a separate cost measurement is desired. It appears that a cost object is any activity on which cost can be measured and it is of great importance in accounting because it helps in assigning and allocating costs to various cost centres.

3. Cost Centre

Garrison and Noreen (2003) define a cost centre as a business segment whose manager has control over costs but not revenue and investment funds. This definition relates to those of revenue centre, profit centre and investment centre.

A revenue centre is a segment of an organisation, mainly a decentralised one whose manager is responsible of revenue generation.

A profit centre is defined as a business segment whose manager has control over costs, revenues, but he does not have control over investment funds.

Finally, an investment centre is the segment of an organisation whose manager has control over costs, revenues and investment on operating assets.

All these terms are grouped under the expression Responsibility centres, and these centres are of great importance to the cost accounting department of the an organisation because they are used in the process of decentralising and delegating authority in an organisation and as such they are a good yardstick for allocating and assigning costs.

4. Cost allocation and apportionment

Lucey (1993) defines cost allocation as that part of cost attribution which charges a specific cost to a cost centre or cost unit. The purpose of allocating costs to cost units or cost centres is to determine with accuracy the amount of costs used to perform a particular activity; this is done with the goal of easing the unit cost determination. Cost allocation is one of the methods used to assign costs to costs objects, the others are direct tracing and driver tracing.

Direct tracing is quite the most accurate method of cost assignment; it relies on physical observable causal relationships.

The next best method in terms of accuracy is diver tracing; this method relies on causal factors called drivers to assign costs to costs objects, the precision of the method depends on the casual relationship described by the driver. But this method is very costly because it requires the identification of drivers and the assessment of the quality of the causal relationship.

Allocation has the advantage of being simple and of having a low cost of implementation.

Source: Hansen, D.R., &Mowen, M.M.,(1997), Management Accounting (4^th edition), p 32, South-western College Publishing, Cincinnati, Ohio

5. Cost drivers

Costs are always incurred when pursuing certain goals. These goals must be subject to some factors that influence the level of cost incurred. Such factors are called cost drivers. As such Drury^10(*) (1992) defines a cost driver as the events or forces that are the significant determinants of the cost of the activities. This is an important aspect of Activity-based costing, which is a generic term used to describe costing methods that assume that costs are subject to changes in their level due to some forces or events as stated above.

Cost drivers according to the nature of the cost being studied, we may have costs that vary with the level of output or some that vary with the level of inputs used such as the number of machine-hours or labour-hours.

These variations in the level of costs lead us to the desire to study their characteristics such that we may predict their behaviour with reasonable certainty.

6. Cost classifications

There are a variety of reasons why we need to classify costs. Among the most important are the prediction of their behaviour, the tracing of these costs to the various cost units or cost centres or the valuation of inventories. Depending on the kind of company under study, we have different types of costs in the picture; the costs identified in a manufacturing company may not be the same as those of a service company, a retailer may not have the same costs as his supplier dealing in the wholesale business.

In order to provide management with accurate information about costs we therefore need to analyse them into logical sections that will be more meaningful than the current bulk of data.

The three major ways of classifying costs use three parameters, namely: the nature, function and behaviour.

COSTS CLASSIFIED ACCORDING TO THEIR NATURE

The nature of a cost is related to its traceability, relevance, and its sensitivity to management actions in the decision making process. Here is a brief description of the different types of costs listed according to their nature.

Direct cost:

This is an expression used to describe costs that can be easily and conveniently traced to the particular cost object under consideration. (Garrison & Noreen 2003). It is generally used along side with the concept of indirect cost.

Indirect cost:

This is simply the contrary of the direct cost and Garrison and Noreen (2003) refer to it as the cost that cannot be easily and conveniently traced to the particular cost object under consideration.

Costs are generally classified as direct or indirect when we need to devise a means for the assignment of costs to the cost objects. This is very helpful as it gives the manager the opportunity to evaluate either the profitability or implement cost control programmes for the cost object concerned, as he will have valid information on the amount of resources consumed by that cost object.

Product and period costs:

The nature of the cost here relate to the timing of their liquidation as expenses on the income statement. This distinction between product and period costs is mainly due to the Matching principle of financial accounting, Drury (1992). This principle is based on the accrual concepts and it states that: «Costs incurred to generate a particular revenue should be recognised as expenses in the same period that the revenue is recognised.» So the difference between product and period cost will be due to the purpose for which the costs are incurred; if it is a cost used to produce or acquire an item that may be sold then it will be considered as product cost otherwise it is a period cost. We can therefore agree with the definition of Garrison and Noreen (2003), that a product cost includes all costs that are involved in the acquisition or making of a product. Taking the example of a manufacturing company, product costs are the direct materials, direct labour and manufacturing overhead costs that are used to manufacture a particular item.

These costs have a double treatment according to the time and financial account. Since these costs are incurred while acquiring or making a product, they will be used in the valuation of the stocks of that product until it is sold. This means that, before the sale, these costs are treated as assets in the balance sheet of the company. Once the sale has been performed, the revenue earned from their sales must be matched against the costs incurred for during their production; these costs are then treated as expenses on the income statement to match them to the sales revenues and obtain the margin or contribution to the overall profits of the company. So these can be called inventoriable costs as they are used for stock valuation purposes.

Garrison and Noreen (2003) define a period cost as all the costs that are not included in product costs. Since these costs are not used for acquiring or making products, the company considers them as expenses in the period in which they are incurred. Some examples of this type of costs include selling and administrative costs, office rent or financial charges.

To better illustrate the concept of product and period cost, let us draw a diagram that will show how costs may be classified and how they flow into the various accounts of a company.

Source: Garrison R. H., Noreen E. W., Managerial Accounting, Mc-Graw Hill, New York, 2003, p 50

Relevant, irrelevant, differential, opportunity and sunk costs:

In this situation, the nature of the cost will be tied to its usefulness in the decision making process.

Differential or incremental cost

Incremental analysis is a valuable tool in accounting as in finance and economics. Incremental simply means additional. Generally in the business environment, we are faced with many alternatives ways of performing an activity. A differential analysis is therefore essential to select which alternative to take on. This differential analysis focuses on the costs and revenues associated to each alternative. A differential cost is therefore the difference in cost between any two alternatives, so it is not a constant figure; it depends on the couple of alternatives selected. It refers to the cost that may be avoided if the alternative is rejected so it can be called avoidable cost.

Opportunity cost

As outlined by Garrison and Noreen (2003), it is a concept that is not usually entered in accounting records; nevertheless, every manager when making decisions must consider it. Samuelson and Nordhaus^11(*) (2000) state that this concept is much broader when defined in economic terms, but it refers to the potential benefit that is given up when one alternative is selected over another. It is the cost of the forgone alternative.

Sunk cost

Garrison and Noreen (2003) define it as a cost that has already been incurred and that cannot be changed by any decision made now or in the future. This can also be termed unavoidable cost. It is not very relevant when making decisions as it cannot be changed or avoided through a decision made by management; examples of this are the cost of acquiring fixed assets.

Controllable and uncontrollable costs.

When decentralising an organisation and delegating the authority to its various segment managers it becomes easier to evaluate and judge their respective performances. In order to achieve this task, senior management needs to identify the costs that can be monitored by those managers. Such a situation leads to a new classification of costs as either controllable or uncontrollable.

Controllable costs

Anthony & Reece ^12(*)(1975) states that an item of cost is controllable if the amount incurred in (or assigned to) a responsibility centre is significantly influenced by the actions of the manager of the responsibility centre. Controllable costs refer to all those cots that are under a manager's authority, it means that this manager has the authority to modify them depending on his plans. As an example a manager may have authority over supervisors employed in his department, but he may not be able to fire or hire them, so the supervisory costs of that department will not be classified as controllable costs for the department's manager.

Uncontrollable cost

This is simply the contrary of the controllable cost. It is one that is not under the regulation of a particular manager as the supervisory cost of the previous example.

This classification of cost as either controllable or uncontrollable must be used alongside with budgeted costs. These budgeted costs will serve as standards for comparison against the actual performance. In order to evaluate a manager's performance, we must have a yardstick or a measuring rod that will ease the process and this measuring rod must be a Cost Budget established at the beginning of the accounting period.

b) COST CLASSIFICATIONS ACCORDING TO THEIR FUNCTION

The activities performed in a manufacturing company generally encompass all the activities performed in all other forms of enterprises. In a manufacturing company, for products to come out of the production lines a number of processes must be completed. Each of these processes is performed in a particular department or segment of the company; these are generally described as functional departments controlled by specific specialists; this division of the company into functional departments creates the need to differentiate and classify costs according to the functional department in which they are incurred.

Such a classification is made to come out with the various departmental costs which will be used for stock valuation, control and decision making purposes.

Manufacturing costs

This is generic term used to describe all the cost items that enter into the production of a particular good. It usually consists of three elements, namely: direct materials, direct labour and manufacturing overheads.

Direct materials

Garrison and Noreen (2003) describe direct materials as those materials that become an integral part of the finished product and that can be physically and conveniently traced to it. The direct materials costs are an integral part of the direct costs previously discussed under the nature of costs. Direct materials refer to those costs that are incurred in the assembling area of the production process, it consists of all those items that are used to manufacture a product and that are specific to that product such as the sheets of paper used to print a newspaper.

Direct labour

This is another element of the direct costs. Drury (1992) defines it as the labour costs that can be specifically traced or identified with a particular product; it is sometimes called Touch labour since it generally requires direct labour workers to touch the product while it is being made.

Direct expenses

It is very difficult to find this item in the cost structure of many companies. Inman^13(*) (2001) states that they refer to the services that can be clearly and directly associated with a specific output or service. Examples of this type of costs are copyright expenses, patent rights, royalties or the cost of hiring a machine.

Manufacturing overheads

We have already defined the direct items of the cost incurred to produce or make a particular product. There are also some costs that are quite of the same origin as the direct costs but which are used for the whole department or the company and cannot therefore be trace to specific units of output; such costs are known as manufacturing overheads. Synonyms for these cost items are factory overheads or factory burden. It generally includes the lighting and heating costs, property taxes, insurance or depreciation of the company assets. As it can be seen, it applies to the costs incurred by the company to enable the processing of all its activities not only a single one.

From these items of manufacturing costs, we can derive two important concepts: prime cost and conversion cost.

Prime cost refers to the combination of direct materials, direct labour and direct expenses required to produce a particular item. It is a very important concept when making the cost structure of an entity. It is the primary cost of a product, it constitute the basic requirement for its production.

Conversion cost is the combination of direct labour cost and manufacturing overheads; it is called conversion cost because it refers to the elements required to convert direct materials into finished goods. As we know, direct materials constitute the heart of the product; direct labour and manufacturing overheads just serve as facilities to ease the production of the required item.

The company, as stated above may be divided into multiple departments, the core one being the manufacturing department. Others could be termed as non-manufacturing departments and this terminology will help us in describing the costs incurred in these non-manufacturing departments.

Non-manufacturing costs

Administrative costs

Garrison & Noreen (2003) states that it includes all executive, organisational and clerical costs associated with the general management of an organisation rather than with the manufacturing, marketing or selling activities of the company. It is another kind of overhead cost; they are incurred by the administrative staff of the company and are not traceable to any particular product, cost object or processing department.

Marketing and selling and distribution costs

These are the costs incurred to make sure that customers receive their orders safely; that is they are the costs incurred by the company during the promotion, advertising, sales and follow-up activities. They are also called order getting and order-filling costs.

Research and development costs

These are the costs associated with the research and development departments of the company. In that department, the aim is to discover new products, devise new processes, improved means pf production. In fact it is a matter of innovation. This is a very important department of the company as it helps the company to differentiate its products and services form those of competitors. So the costs of making such improvements should also be taken into consideration when making certain decisions.

Quality cost

The image of a company is generally judged based on the quality of its products and services. Companies would like to have defects-free products in order to satisfy their customers and to reduce the after-service and warranty costs. The need arises therefore to prevent, detect and reduce the defects that may be found in the production. The costs associated with these activities are known as quality costs; the quality costs can be divided into four categories (Garrison and Noreen: 2003)

The first two categories are prevention and appraisal costs which are incurred in an effort to avoid defective products from being produced.

The last two categories are internal failure and external failure costs which are incurred for the purpose of reducing the effects of the production of defective items.

This description of costs from the functional point of view has helped us in identifying various types of costs; but these costs can be analysed from another point of view, namely their behaviour when related to changes n the level of activity.

c) COSTS CLASSIFICATION ACCORDING TO THEIR BEHAVIOUR

This classification of costs deals with the way costs react to changes in some factors. The most important factors that cause some costs to change are the level of activity and the time factor.

As it concerns the level of activity, generally costs are incurred because of performing a particular activity, this activity may consists of various processes among which a major one that is sometimes regarded as the main cost driver. It is that one whose changes will result to very significant changes in the level of costs. It becomes possible at that point to relate the level of activity of that cost driver to the level of costs and as such the behaviour of that cost will be linked to the cost driver.

Concerning the time factor, costs do not behave the same way in the long run as in the short run. As time elapses, there may be changes in the market conditions such as inputs costs, level of demand or production procedures. Such changes in the market situation over time will lead to a need to a new analysis of costs depending on the time span of the plans we are making.

Variable costs

Lucey (1993) defines a variable cost as a cost that tends to vary with the level of activity. Garrison and Noreen more precisely define it, as a cost that varies in total in direct proportion to changes in the level of activity. An important aspect of this definition is the fact that variable costs vary in total, this is because on a per-unit basis the variable costs are constant and it is only when the level of activity, which may be the output, or the number of hours worked changes that the total variable cost also changes. This explains why the variable cost is always expressed in relation to a particular factor. The figure drawn below depicts that relationship between the level of activity and the behaviour of variable cost.

Such descriptions of variable costs are only a linear approximation of real-life situations. This is because, in real life, variable costs are rarely completely linear; they may also be curvilinear. A curvilinear variable cost is one which varies ion total in either «less than» or « more than» proportionate variation with the level of activity.

When an increase in the level of activity leads to a «less than» proportionate increase in the level of costs, this cost is referred to as concave curvilinear variable cost. The opposite is a convex curvilinear variable cost. They are illustrated in the graphics below.

Fixed cost

Garrison and Noreen (2003) define this, as a cost that remains constant in total regardless of changes in the level of activity. On a per-unit basis, fixed costs continuously decrease as the level of activity increases. This is because there are constant amount of costs to be incurred by the company whatever the level of activity is and as such, the greater the level of activity, the greater the distribution of fixed costs over the units of output.

Semi-variable cost

This is a type of cost that has both fixed and variable components. A semi-variable cost is one which remains constant up to a certain level of activity and which becomes variable for any activity level above that level.

Semi-fixed cost

These are costs that remain constant during short time periods but which vary in the long run. They are also described as step fixed costs. This type of cost is subject to changes at various critical level of activity; as long as the company remains in a certain range of activity, these costs are fixed, but they change when the company shifts to a new critical level.

Short and long term variable costs

These are two terms used to describe the behaviour of costs in relation to the joint effects of the level of activity, the time factor and the range of activity. Cooper and Kaplan^14(*) (1987) defined a short-term variable cost as one that varies with the production volume. These are the costs that are directly affected by increases in the level of production. They are continuously changing.

The long-term variable costs are those that are affected by other factors than the level of activity and principally the range of items produced. These costs are usually considered as fixed over short periods of time but as the means and processes of producing various kinds of times change in the long run, these costs obviously change and as such they will no more be considered as simple fixed costs.

So, to conclude this discussion of cost behaviour, it is important to note that the predominant aspect in analysing the behaviour of a cost is the factor to which it is tied; the factor that really influence the cost. There may not be only one factor, but as many as the number of cost drivers.

II. THEORY OF COSTING: METHODS AND TECHNIQUES

This study is concerned with the method of applying job costing to the accounting procedures of SOPECAM. In the process of using job costing, we shall take two approaches to the costing exercise, namely the variable and absorption costing approaches. This simply means that we are interested in studying a particular costing method and its use under two costing techniques; we must therefore first of all understand what is meant by costing methods and costing techniques and how they differ from each other.

A. COSTING METHODS

Lucey (1993) defines costing methods as the methods of costing designed to suit the way goods are processed or manufactured or the way that services are provided. It therefore refers to the various methods that can be used to come out with the cost of an activity. It appears that the costing method must suit the product or service to cost. This is the reason why we may have two broad categories of costing methods, namely:

1. Specific order costing:

This is a costing method applicable where the work consists of separate jobs or batches. The main sub-divisions of specific order costing are: job costing, contract costing and batch costing.

2. Continuous operation or process costing:

This costing method applies where the goods or service produced result from a sequence of conditions or repetitive operations or processes to which costs are charged before being averaged over the units produced during the period. Its main sub-divisions are: process costing including joint product and by-product, and service/function costing.

a) Job costing

This is a traditional method of accounting for cost. This is a method where the costs incurred are allocated, apportioned and absorbed by the cost unit, which is the object to cost.

Here the company production is divided into jobs, which may be of the same nature, but generally they are all different. The purpose here is to determine the profit made on each job, as this will be helpful for future planning.

b) Batch costing.

Being another type of specific order costing method, it is one which applies when a quantity of identical items are manufactured as a batch. It is very similar to job costing but the main feature of batch costing is that the unit cost is the ratio of the total cost of the batch to the number of units in the batch. This method is widely used in the footwear and clothing industries where similar items are manufactured.

c) Process costing.

This is a costing method, which is used when the production is essentially made of homogenous products, which are being produced on a continuous basis. It is very close to job costing in that:

Now that we know the different methods that can be used to build a company costing system, we must now determine the techniques to be employed depending on the destination of the output information.

B. COSTING TECHNIQUES

The costing techniques are the number of tools, processes and procedures that may be used alongside with a costing method to come out with the cost of an activity. There are several costing techniques among which: absorption costing, marginal costing, standard costing or activity-based costing.

For this study we will concentrate on the use of absorption and variable costing used in conjunction with job costing to determine the unit cost of the newspaper Cameroon Tribune. We therefore need to discuss each of these methods to understand the mechanisms involved.

1. ABSORPTION COSTING

Sometimes referred to as full costing, absorption costing is a costing technique in which all costs are absorbed into the production units and as such both fixed and variable costs are allocated to the cost units. Drury (1992) states that in absorption costing, all manufacturing costs are allocated to products, unsold stocks are valued at their total cost of manufacture and non-manufacturing costs are not allocated to products but are charged directly to the profit and loss account, so they should be excluded from stock valuation.

The procedure to follow when preparing a profit statement using absorption costing can be summarised as follows:

The following are some of the arguments used by the proponents for the use of absorption costing, Lucey, T (1992)^16(*):

a) Fixed costs are a substantial and increasing proportion of costs in modern industry. Production cannot be achieved without incurring fixed costs, which thus form an inescapable part of production so they should be included in stock valuations. Marginal costing may give the impression that fixed costs are somehow divorced from production.

b) When production is constant, but sales fluctuate, net profit fluctuations are less with absorption costing than with marginal costing;

c) Where stock building is a necessary part of operations, the inclusion of fixed costs in stock valuation is necessary and desirable. Otherwise, a serious fictitious loss will be shown in earlier periods to be offset eventually by excessive profits when the goods are sold.

d) The calculation of marginal cost and the concentration upon contribution may lead to the firm setting prices which are below total cost although producing some contribution. Absorption costing makes this less likely to happen because of the automatic inclusion of fixed charges.

e) SSAP 9 which is about the stocks and Work in progress, recommends the use of absorption costing for financial accounts because revenues and costs much be matched in the period when revenues arise not when the costs are incurred. Also, it recommends that stocks valuations must include production overheads incurred in the normal cause of business even if such overheads are time-related, that is fixed. The production overheads must be based upon normal activity levels.

2. VARIABLE COSTING

Also referred to as marginal costing, or in some other texts as direct costing; variable costing as stated by Coulthurst (2001) is a costing technique which places more emphasis on the behavioural characteristics of the costs unlike absorption costing which focuses on the functional nature of the those costs. The aim in variable costing is generally to separate the costs into fixed and variable elements.

Copeland, Dasher et al (1995)^17(*) defines variable costing as a form of cost accumulation in which only the variable costs are accumulated with inventory as it is being manufactured. Under variable costing, fixed overhead costs are not accumulated with the inventory being manufactured; instead they are regarded as period expenses. As shown in the above definition, unlike absorption costing which assigns both fixed and variable costs to the cost units, variable costing treats fixed costs as period costs and they are therefore not included in the unit cost calculations.

The preparation of a profit statement using marginal costing can be done using the following format:

b) No apportionment, which are frequently on an arbitrary basis of fixed costs to products or departments. Many fixed costs are invisible by their nature.

c) Where sales are constant, but production fluctuates, marginal costing shows a constant net profit whereas absorption costing shows variable amounts of profits.

d) Under or over absorption of overheads is almost entirely avoided; the usual reason fro under or over absorption is the inclusion of fixed costs into overhead absorption rates and the level of activity being different to that planned.

e) Fixed costs are incurred on a time-basis and do not relate to activity, therefore, it is logical to write them off in the period they are incurred; this is done using marginal costing.

f) Accounts prepared using marginal costing more nearly approach the actual cash flow position.

Using a particular costing technique will mainly depend on the use that will be made of the output information. This cost information may be used for external reporting, internal decision-making or future planning.

Costing techniques do not replace the costing methods; they are always used together in order to have a complete costing system.

This paragraph ends our discussion on cost concepts. This study is not only aimed at studying the cost structure of SOPECAM, it is also designed to help management in the process of pricing their products. As such we need to have an insight into the pricing theory based on cost information and this will be the topic of the next paragraphs.

III. PRICING DECISIONS BASED ON COST INFORMATION

After having determined the unit cost of its products or services, analysed other factors such as the expected demand or the market structure, the company focuses on establishing a price that will lead the maximisation of the profits. This is the essence of the pricing decision.

Pricing simply means setting a price for a product or service as stated by Kotler and Dubois^18(*) (1997). When setting a price for its products, a company is surely seeking to achieve certain goals and for this to be done, the company must follow some principles and techniques.

1. Pricing objectives

The objectives of the pricing policy which are also outlined by the afore-mentioned book are as follows:

a) Survival:

Any company must set prices that will at least help it to remain in the market even if the company is operating in a highly competitive environment.

b) Profit maximisation

The main objective of any business enterprise is to maximise profits and as such any policy or method used by a company must first be aimed at maximising these profits.

c) Turn over maximisation

Since this is an indication of healthiness for companies where it is difficult to evaluate costs, it must therefore be maximised to be sure that the company is safely operating.

d) Growth maximisation

This objective is mainly derived from the economies of scale concept of the economists; this concept states that higher sales lead to long term cost reductions and therefore greater profits.

e) Goodwill and image preservation

This stems from the desire of the company to be regarded as one maintaining a certain standard or policy in pricing; this standard or image surely relate to the quality of the products or services offered by the company.

2. Pricing techniques

Depending therefore on the objectives of the company, it can adopt various pricing techniques. These techniques normally are based on a great number of factors, but here we will be interested in studying those that are based on the cost information provided to management. Pride, Hughes and Kapoor ^19(*)(1988) call them cost-based or cost-plus pricing techniques). We will focus on three of them namely: Total cost-plus, manufacturing cost-plus, and decision-relevant cost-plus method.

a) Total cost-plus pricing

In this method, the future selling price is the result of the addition of a desired set of mark up to the total unit cost of a product or service. This method may be a good one, but the problem here is that it is sometimes difficult in some industries to succeed in allocating overhead expenses to the units of production.

b) Manufacturing cost-plus method

It follows quite the same procedure as the previous one, but here, the costs that are taken into account are the manufacturing costs and as such overhead costs are left out of the calculations. A large mark up percentage is therefore required to cover these overheads and allow for reasonable profits for the firm.

Drury (1992) identified that this method has as main advantage the fact that the cost figure used for pricing is the one used for stock valuation. In this case, if the firm has been producing similar products in the past, it may be easy to determine the estimate of the total manufacturing costs by simply adjusting the old figures.

c) Decision-relevant cost-plus method

It consists of basing the pricing policy the figures of the incremental costs due to producing the new elements. Here what is required is a perfect knowledge of the avoidable and unavoidable costs if the production of a particular item is started. Since the fixed costs of the company will remain constant for short period, then the mark up is added to the additional cost of producing that new item.

The above three refer to the most popular methods of pricing, there is another one based on activity-based cost, which just consists of adding the mark up to the activity based-determined cost. That method is not very different from the others, the main difference residing in the method of determining the unit cost.

These costing methods as we have outlined at the beginning ignore many factors and as such must be used alongside with other elements to come out with a more reliable selling price. The following limitations of these methods explain why they should not be solely used.

Limitations of cost based pricing

SALES ESTIMATES

Ø Common fixed costs: this limitation is in relation to the method used to apportion costs and depending on the method used the cost obtained will be different and will therefore lead to a different pricing decision.

Ø Pricing floor: generally, cost based pricing is referred to as a method that gives the seller a little amount of security against loses as the cost are always covered by the selling price. But in real life situation, it is sometimes found that the sales of the product are subject to fluctuations in demand and as such the total revenues may not be able to cover the total costs at certain levels of sales other than the budgeted ones.

Recalling again that these methods are used just as a guide to final pricing decisions, we must not therefore pay too much attention to their limitations, but understand that theses methods are helpful as initial approximations of future selling prices.

IV. THE THEORY OF JOB COSTING

Job costing is a costing method that has constituted the central point of many studies conducted by various researchers.

Drury (1992) has described the procedures used in a job costing system and the accounting entries necessary to record the transactions taking place in a company using job costing. While analysing the various costing methods, he stated that job costing should be used when the company output is made of various jobs or orders from separate customers; he also stated that there are two alternative ways of designing a job costing system: either as an integrated cost accounting system or as an interlocking cost accounting system. These systems will be explained later in the chapter.

Drury (1992) advocated the use of an integrated cost accounting system as this reduces or avoids the duplication of records as found in an interlocking system.

Lucey (1993) also examined the mechanics of a costing system where job costing is employed. He first stated that this system must be used where the work to be performed is on customer's requirements. Secondly, this system must be based on good records obtained from production, works documentation, material and labour bookings. The documents used here are the Material requisition forms, time tickets and the job cost sheet. Once prime costs have been gathered, overheads must be charged to jobs and this can be done using either the Traditional methods based on the labour or machine hours overhead absorption rates or using the cost drivers rates of an activity-based system. He finally pinpointed that, for profits to be derived from a job costing system, it will depend on the costing technique used.

Garrison and Noreen (2003) also contribute in the advancement of the knowledge on job costing. They first identified the type of industries where job costing can be used, namely: furniture, manufacturing, hospitals or legal firms. These are industries where the companies offer a wide variety of products or services.

From their point of view, material requisition forms, labour time tickets must be used for the assignment of direct materials and labour to the various jobs; then concerning the manufacturing overheads, they must be assigned using he predetermined overhead rates. The predetermined overhead rates generally use labour or machine time as the allocation bases.

They finally make a point in illustrating the flow of costs in a job costing system, from the raw materials to the foods sold.

V. EMPIRICAL STUDIES ON JOB COSTING

As a product costing method, job costing has been mentioned in various studies conducted by some researchers exploring the topic of product cost determination.

One of them, Gorpinpaitoon^21(*) (1982) made a study on the use of job costing in the shipbuilding industry in Thailand.

His study was aimed at examining the costing method used by shipbuilding firms in Thailand in order to ascertain the principle, the costing method and its problems. This study was made through direct observation of the actual operations and the interviews of the personnel involved in that industry.

At the end of the study, it was realised that the costs of direct materials and direct labour are charged to the job, but factory overheads are accumulated and allocated to each job on the basis of direct labour cost or as a percentage of work finished.

Ngu^22(*) (1997) conducted a study on the topic of product cost and in it, he identified importance of a product cost to the decision making process of the company. The data used were got from primary and secondary sources and had been analysed using quantitative and qualitative means. In the study, he made the point to differentiate the various costing methods that can be used to come out with the product cost among which job costing. The study revealed that companies making one of a kind or special order products use job costing.

The study finally showed that it is very important to determine the cost of a product as this is of great importance to the decision making process of the company.

VI. THE MECHANICS OF JOB COSTING

Job costing is cost accounting method, and as such when using it or adopting it in a company, we are required to follow a set of procedures for the recording of the various transactions in the company.

This recording can be made using either an interlocking or an integrated cost accounting system. An integrated cost accounting system is one in which the financial and cost accounts are combined in one set of accounts. In an interlocking cost accounting system, the financial and cost accounts are maintained independently. As stated by Drury (1992), it is better to adopt an integrated cost accounting system as this permits to avoid the duplication of records.

In job costing, the basis for the recording of transactions is a set of control accounts. A control account is a summary account where entries are made from totals of a period's transactions; these totals come from the individual accounts where the transactions are primarily recorded and these are called subsidiary ledger accounts. In addition to posting these transactions in the various accounts concerned, we will have to post them on a Job cost card or job cost sheet.

The job cost sheet is a form prepared for each separate job that records the materials, labour and overheads costs charged to the job.

The accounting procedures and mechanics of job costing will be examined following the various steps involved in the manufacture of a product by a manufacturing company, that is from the purchase of raw materials to the selling of the finished goods, passing through the charging of labour and overhead costs, Drury (1992) and Garrison & Noreen (2003).

1. Purchases of raw materials

Following the double entry principle and the other rules of financial accounting, if raw materials are acquired, this represents an increase in current assets but also an increase in the level of current liabilities until cash payment is made; this transaction will then be recorded as such:

2. Issue of raw materials

This transaction occurs when materials are needed in the production department, the production department will request a particular quantity of materials using a material requisition form on which the job number will be specified. This form will be presented to the storekeeper, who in turn will supply the materials requested.

The work in progress account represents the products that are not yet completed and until a good is complete it is considered as part of the work in progress stock and all the items entering in its production should be posted on that account.

The above record concerned the issue of direct materials, if some indirect material is issued, then the following record should be used:

3. Labour costs

Once the payroll accounting has been done, that is the determination of the gross pay for each employee and the calculation of payments to be made to employees, government, pension funds and others. We can now allocate labour costs to the various jobs, overhead accounts and capital accounts.

The wages due to employees are computed from the records of each employee time tickets. These tickets show the time periods spent on each job and the various indirect labour hours. It is recorded as follows:

4. Manufacturing overheads

This concerns all the factory costs other than direct materials, labour and expenses. They are entered into the factory overhead account as they are incurred. This is done as follows:

Now we must charge these costs to the various jobs, this needs to be done following an objective measure. This measure is known as the predetermined overhead absorption rate. The overhead absorption rate is a kind of coefficient, which is used to allocate manufacturing overhead costs to jobs. It is computed using an allocation base; this allocation base refers to the most influential cost driver for that particular cost. This means that there may be several overhead absorption rates for various costs depending on the allocation base used. The overhead absorption rate is determined at the beginning of the accounting period using the formula:

Predetermined overhead absorption rate=estimated total manufacturing overhead cost/ estimated total units in the allocation base

Once we have obtained the overhead absorption rate (OAR), assigning overheads to a job is done as such:

Overhead applied to a job= OAR*amount of the allocation base incurred by the job

Given the OAR, we can then apply manufacturing overheads to the jobs and this is reflected in the accounts as follows:

Once all the entries have been posted into the factory overhead control account, we can then reconcile the two sides of that account. Normally if the two sides are equal, this will mean that the company charged the same costs that it incurred. A larger debit side means that the company charged less than what it actually incurred and the balance between the two sides is referred to as the under absorbed overhead costs and they must be posted to the debit side of the profit and loss account as a period cost.

A larger credit side of the factory overhead account will mean that the company charged more costs than what it actually incurred and the balance between the two sides is called the over absorbed overhead cost, and it must be posted to the credit side of the profit and loss account in order to reconcile between the various accounts of the company.

5. Non-manufacturing overhead costs.

These are not product costs and as such should not be charged to the work in progress account. When incurred by the company in the process of manufacturing the products, they should be recorded as follows:

At the end of the period, these costs will be transferred to the profit and loss account, as they are period costs.

6. Jobs completed.

When a job is complete, the output is transferred from the factory to the finished goods stores. The cost of this job is transferred from the work in progress account to the finished goods account.

This transaction ends the first part of the work, as the cost of the goods manufactured is known. What is required is then to compute the cost of goods sold and the various profits to be derived from each job; this will require the use of particular costing techniques depending on the purpose of the computation of the profits and this will constitute the core of the next chapter.

CHAPTER THREE:

METHODOLOGY

I. INTRODUCTION

So far we have already tried to lay the bases for the continuation of our study; much has been done to give the reader an insight into the theory of job costing and the related costing techniques that can be used in conjunction with that costing method. An overview of the pricing theory has also been done and we have tried to relate the costing theory to that of pricing and we can now assume that it is possible to draw or formulate a pricing policy depending on our cost information.

In order to make these theories relevant, we need to apply them to a particular or real-life case. It was mentioned at the beginning of the study that SOPECAM and its product, the newspaper Cameroon tribune, constituted our area of interest. We will therefore try to adapt the costing and pricing theories to the case of SOPECAM. Before we reach that level, some specifications have to be made about the way the study will be conducted and this constitute the core of this chapter.

As such, this chapter will be aimed at first providing a background information on the area of study, it will then concentrate on the techniques that will be used to analyse the situation by specifying the variables of the study, the model that will be used to analyse the data, which may have been collected using particular techniques and finally, some precisions will be made about the sampling plan.

II. BACKGROUND INFORMATION ON THE STUDY AREA

The Cameroon News and Publishing Corporation (SOPECAM) is a State-owned enterprise whose headquarters are located in Yaoundé, the Nation's Capital. The principal activities of this enterprise consist in publishing and printing the bilingual daily newspaper «Cameroon Tribune», the collection and sale of news, and finally some printing and publishing works. This commercial and industrial enterprise placed under the administrative supervision of the Minister of communication, is today 25 years old.

On the 1^st July 1974, date of the launching of the daily newspaper «Cameroon Tribune», SOPECAM has not yet been given birth; the publishing, printing and distribution of this newspaper was done through three enterprises, namely:

These three enterprises continue to assure the publishing of «Cameroon Tribune» until the creation of SOPECAM by the presidential decree N° 77/250 of the 18 July 1977 aimed at the creation and organisation of SOPECAM. This corporation was the result of the vertical merger of the three preceding enterprises. The capital of this enterprise amounted to CFA 250,000,000. Concerning the legal side of the operation, this corporation is a complete legal entity having its life distinct from that of its unique owner (the State) and financially, this enterprise is also completely autonomous; finally the enterprise is ranked at the second category of the State-owned enterprises.

When creating this enterprise, the Cameroonian State was trying to solve two mains problems:

Ø Firstly, there was a political wish to organise into a unique entity the vast sector of the public written press, in order to ease the collection and spreading of the news and the printing and publishing of newspapers.

Ø Secondly, from an economic point of view, there was a need to reduce the operating costs of AGRACAM, SCP and ACAP.

Later run, SOPECAM was reorganised through a second decree, the decree N° 85/1716 of the 12 December 1985; this decree brought about some changes in the structure of SOPEACM

As it is common with any human organisation, SOPECAM had some major goals to be achieved when the enterprise was created, we will try to list and explain these goals.

OBJECTIVES OF SOPECAM AT ITS CREATION

Ø To try by all the appropriate means to obtain the components of complete news in and out of Cameroon.

Ø Through alliances and contracts with foreign news agencies, make sure that international news will be constantly available to the public.

Ø To make all the national and foreign news available to all users, be them public or private users from within and without the National territory, in the form of newspapers, periodicals, telegraphic means, at some cost, with a view of providing the world with better information about the life, political, economic, social and cultural activities.

But, in order to achieve these objectives, SOPECAM needs to have enough resources, especially financial resources.

THE SOURCES OF FUNDS OF SOPECAM

STRUCTURE OF SOPECAM

From the content of the decree N° 85/1716 of the 12 December 1985, the SOPECAM has three main components:

III. SAMPLING PLAN

a) Sampling technique

Since we are mainly interested in studying the public sector companies of the printing industry, we will take SOPECAM as our convenient sample. This is because SOPECAM is very a representative element of the population we wish to study.

b) Data collection

c) Variables of the study:

In this study we will pay a particular attention to the evolution of the unit cost of the newspaper Cameroon Tribune and its effects on the pricing and cost control policies.

d) Data analysis

Data will be analysed using both qualitative and quantitative models. But much of the analysis will be done using quantitative tools.

e) Model specification

In this study, we will make use of the Student's-t distribution in order to test our hypothesis.

The Student's-t-distribution is a probability distribution used to test the research hypothesis for situations involving the comparison of two means when the sample size is small or when the variances are not known.

As stated by Grais^23(*) (2000), the model assumes that there are two populations P1 and P2 from which two samples are collected:

In our case, the populations will be represented by the monthly production of the newspaper and we will draw a sample production week from that month. Let us assume that ì₁and ì₂ are the respective mean unit costs of the week obtained by applying absorption and variable costing respectively and ó²₁ and ó²₂are the respective unknown variances whose sample estimates suggest relatively equal variances that is S²₁=S²_2.

The sample sizes, represented by the number of production days per week, that is 5, being known and less than 30, there is a need to estimate a pooled weighted variance denoted S²

It appears that the difference in means A₁-A₂ is normally distributed with mean and variance expressed as follows:

From this information, it is now possible to state our hypothesis in mathematical terms such that it can be tested using the afore-mentioned test.

H_o: (Null hypothesis) A₁-A₂=0, there is no difference between the sample means and both can be used for the same purposes.

H₁: (Alternative Hypothesis) A₁-A₂?0 the two sample means are different and cannot be used for the same purposes.

It is now necessary to start with the analysis of the data collected and the test of the research hypotheses; this will be done in the next chapter, which is mainly about the presentation and the analysis of the results of the study.

CHAPTER FOUR:

PRESENTATION AND ANALYSIS OF THE RESULTS

I. INTRODUCTION

The purpose of this chapter is to present and analyse the results of the studies conducted on the field. We will first give a rough presentation of the cost structure of SOPECAM for the newspaper Cameroon Tribune. Then, we will direct the study towards the determination of the weekly unit cost for the newspaper. These unit costs will then be analysed using the Student's -T-distribution.

II. SOPECAM'S COST STRUCTURE

First of all, it seems worthy to mention at this point that there are various processes necessary for the effective production of Cameroon Tribune.

· Editorial work; this is mainly done by the journalistic staff of the company.

· Pre-Printing works; it mainly consist in the preparation of the photographic sheets that will be used to print the newspaper.

· Factory or printing stage; this is the final stage in the production of the newspaper, as its name implies it is at this stage that the newspaper is printed and the pages are arranged following a certain order.

The various materials used in the manufacture of the newspaper are consumed at the various stages of the production process in addition to the labour provided by each employee of SOPECAM, particularly those of the editorial staff. Concerning the work of the other employees, the associated costs are charged to the unit cost of the newspaper following an allocation system based on the labour hours required for the production.

That system is the foundation of the determination of the unit cost currently used by the company; it is determined from an adapted «process costing» method in which various departments of the company have been allocated hourly rates as measure of their contribution to the unit cost of the newspaper. These rates are as follows:

As it can be observed from the table, there is no information relating to the labour cost of the editorial staff, therefore, this will be one of the weaknesses of our research work as it could not have been possible for us to obtain data relating to that elements as a matter of confidentiality. Therefore we will have to make an estimate of these costs.

The editorial board of SOPECAM is made up of 12 journalists and secretaries whose work can be directly related to the newspaper. Their salaries can be distributed as follows:

From the data obtained after the interview of the executives of the company, particularly the inventory department manager (annex1), the Manufacturing department manager and the head of the Accountancy and budget service, we have been able to determine the various raw materials that enter into the production of the newspaper, the hourly rates for the labour costs and information about the overhead costs incurred by the company. Normally, this study should be oriented towards the determination of the total unit cost of the company, that is the unit cost after having sold the newspaper as shown on the following diagram:

Source^24(*): Fayel, A. & Pernot, D.,(2001) Comptabilité Génerale de l'Entreprise, 12th edition, Dunod, Paris.

Unfortunately, since there is no managerial accounting office in the company, it has not been possible to obtain figures relating to the allocation bases of these overheads; this shortage of information led us to estimate the expenses related to the selling and distribution and even administrative costs of the company.

We can then present the information relating to the materials used to produce the newspaper, they are:

ITEMS	UNITS	UNIT COST	BEHAVIOUR
Direct materials
Paper	Spool	246 330 F	Variable
Black ink	Kg	10 000 F	Variable
Blue ink	Kg	10 000 F	Variable
Red ink	Kg	10 000 F	Variable
Yellow ink	Kg	10 000 F	Variable
Photographic sheet	Piece	25 000 F	Fixed
Photographic film	Roll	300 000 F	Fixed
Sheet Developer	Dose	198 000 F	Variable
Film developer	Dose	45 000 F	Variable
Film fixing liquid	Dose	45 000 F	Variable
Sheet proofreader	Bottle	10 800 F	Variable
Eraser	litre	8 000 F	Variable
Soaking solution	litre	6 000 F	variable
Sheet cleaner	Litre	15 600 F	Variable
Tracing paper	Ream	50 000 F	Variable
Photocopy paper A4	Ream	5 000 F	Variable
Photocopy paper A3	Ream	17 500 F	Variable
Transparent sellotape	Roll	350 F	Variable
Packaging sellotape	Roll	1 400 F	Variable
Packaging string	Roll	4 500 F	Variable
White glue	Kg	3 500 F	Variable
Industrial rag	Ballot	70 000 F	Variable
Soap paste	Kg	3 000 F	Variable
Toner cartridge HP1200	Cartridge	120 000 F	Variable
Toner cartridge HP5000	Cartridge	180 000 F	Variable
Toner cartridge HP8500-black	Cartridge	150 000 F	Variable
Toner cartridge HP8500-blue	Cartridge	150 000 F	Variable
Toner cartridge HP8500-Red	Cartridge	150 000 F	Variable
Toner cartridgeHP8500-yellow	Cartridge	150 000 F	Variable
Drummer KitC4153A	Cartridge	150 000 F	Variable

The following is an extract of the balance sheet of the company of the period concerned which we cannot state here because of confidentiality; it gives data relating to the annual expenses of the company for the total labour costs, taxes, depreciation, water consumption and many other overhead costs.

Now we are concerned with the determination of the allocation basis for these costs. Because of the lack of precise information, we will use labour as the basis for this allocation. From these data, will try to approximate the weekly and daily figures relating to these expenses so as to be able to arrive at a daily manufacturing unit cost.

The information given above about those costs are just daily means, and this means that for most of them we will have to estimate their real daily amounts as they are not all fixed costs. The only fixed costs among them is the one relaying to the depreciation of the factory machineries.

As demonstrated in the second chapter, the Overhead Absorption Rate is got from the formula:

OAR=estimated total manufacturing overhead cost/ estimated total units in the allocation base

OAR=(depreciation+ spare parts+ Electricity+ water)/(total number of labour hours used per day i.e.: 24)

We already have data relating to the daily overhead expenses, what we need now is some information about the machine-hours used to manufacture the newspaper so that we can charge some of the overhead costs its unit cost. These machine-hours will also be used as the labour hours required for the production of the newspaper in the absence of data relating to the exact salaries the company workers.

The OARs and associated amounts to be charged for the various expenses are therefore equal to:

Table 4-8 OAR for the various overhead costs

OVERHEAD COSTSITEMSYearly WeeklyDailyOARMean Amount chargedWater

5 272 398 F101 392 F20 278 F845 F13 519 F

Electricity

16 382 666 F315 051 F63 010 F2 625 F42 007 F

Depreciation

349 199 867 F6 715 382 F1 343 076 F55 962 F895 384 F

Spare parts

32 540 941 F625 787 F125 157 F5 215 F83 438 F

Total

403 395 872 F7 757 613 F1 551 523 F

Source: The author

Now that we have information relating to the materials, labour, and factory overhead expenses, it is possible for us to determine the daily unit costs using the absorption and variable costing techniques.

III. DETERMINATION OF THE UNIT COST

A. ABSORPTION COSTING

Using the computer software Microsoft EXCEL®, it has been possible for us to come out with the following daily unit manufacturing cost for the newspaper Cameroon Tribune. It can be roughly presented as follows using the format of an income statement:

Table 4-9 Unit cost determination using absorption costing (income statement format)

ABSORPTION COSTING METHOD FOR THE DETERMINATION OF THE UNIT COST OF THE NEWSPAPER
	Monday	TUESDAY	Wednesday	Thursday	Friday	Totals

COSTS
DIRECT MATERIALS

paper	985 320 F	1 231 650 F	985 320 F	1 231 650 F	1 724 310 F	6 158 250 F
black ink	150 000 F	140 000 F	110 000 F	150 000 F	150 000 F	700 000 F
blue ink	30 000 F	10 000 F	20 000 F	20 000 F	20 000 F	100 000 F
red ink	40 000 F	10 000 F	30 000 F	20 000 F	50 000 F	150 000 F
yellow ink	20 000 F	20 000 F	20 000 F	20 000 F	20 000 F	100 000 F
photographic sheet	500 000 F	500 000 F	500 000 F	500 000 F	500 000 F	2 500 000 F
photographic film	60 000 F	60 000 F	60 000 F	60 000 F	60 000 F	300 000 F
Sheet Developer	99 000 F	79 200 F	59 400 F	79 200 F	79 200 F	396 000 F
Film developer	4 500 F	9 000 F	9 000 F	9 000 F	13 500 F	45 000 F
Film fixing liquid	9 000 F	9 000 F	4 500 F	9 000 F	13 500 F	45 000 F
sheet proofreader	1 080 F	3 240 F	2 160 F	2 160 F	2 160 F	10 800 F
eraser	2 400 F	4 000 F	800 F	4 000 F	4 800 F	16 000 F
soaking solution	30 000 F	24 000 F	24 000 F	12 000 F	30 000 F	120 000 F
sheet cleaner	10 920 F	12 480 F	9 360 F	14 040 F	15 600 F	62 400 F
tracing paper	5 000 F	10 000 F	10 000 F	10 000 F	15 000 F	50 000 F
photocopy paper A4	15 000 F	20 000 F	25 000 F	20 000 F	10 000 F	90 000 F
photocopy paper A3	1 750 F	3 500 F	3 500 F	5 250 F	3 500 F	17 500 F
transparent sellotape	280 F	280 F	280 F	280 F	280 F	1 400 F
packaging sellotape	1 120 F	1 120 F	1 120 F	1 120 F	1 120 F	5 600 F
packaging string	2 700 F	2 700 F	2 700 F	2 700 F	2 700 F	13 500 F
white glue	700 F	700 F	700 F	700 F	700 F	3 500 F
industrial rag	14 000 F	14 000 F	14 000 F	14 000 F	14 000 F	70 000 F
soap paste	600 F	600 F	600 F	600 F	600 F	3 000 F
toner cartridge HP1200	90 000 F	90 000 F	120 000 F	180 000 F	240 000 F	720 000 F
toner cartridge HP5000	10 800 F	12 600 F	9 000 F	9 000 F	12 600 F	54 000 F
toner cartridge HP8500-black	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F
toner cartridge HP8500-blue	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F
toner cartridge HP8500-Red	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F
toner cartridgeHP8500-yellow	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F
drummer KitC4153A	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F


*total material cost*	*2 090 170 F*	*2 274 070 F*	*2 027 440 F*	*2 380 700 F*	*2 989 570 F*	11 761 950 F

DIRECT LABOUR
direct labour for pre-printing	42 000 F	48 000 F	45 000 F	54 000 F	48 000 F	237 000 F
direct labour for copy	4 500 F	5 000 F	5 000 F	4 500 F	5 500 F	24 500 F
direct labour for soaking	15 000 F	18 000 F	15 000 F	18 000 F	18 000 F	84 000 F
direct labour for printing works	112 500 F	112 500 F	135 000 F	135 000 F	135 000 F	630 000 F
direct labour for edition	102 000 F	102 000 F	102 000 F	102 000 F	102 000 F	510 000 F
*Total labour costs*	276 000 F	285 500 F	302 000 F	313 500 F	308 500 F	1 485 500 F
*total material and labour costs*	*2 366 170 F*	*2 559 570 F*	*2 329 440 F*	*2 694 200 F*	*3 298 070 F*	13 247 450 F

FACTORY OVERHEADS
water bills (variable)	14 000 F	12 000 F	15 000 F	13 600 F	13 000 F	67 600 F
electricity bills (variable)	42 000 F	45 000 F	40 000 F	43 000 F	40 000 F	210 000 F
depreciation (fixed)	895 384 F	895 384 F	895 384 F	895 384 F	895 384 F	4 476 921 F
spare parts (variable)	85 000 F	100 000 F	110 000 F	60 000 F	63 000 F	418 000 F
*Total factory overheads*	*1 036 384 F*	*1 052 384 F*	*1 060 384 F*	*1 011 984 F*	*1 011 384 F*	5 172 521 F


SELLING AND ADMIN.
fixed admin. Exp.	500 000 F	500 000 F	500 000 F	500 000 F	500 000 F	2 500 000 F
variable admin. Exp.	250 000 F	300 000 F	350 000 F	250 000 F	200 000 F	1 350 000 F
variable selling exp.	200 000 F	150 000 F	250 000 F	150 000 F	200 000 F	950 000 F
fixed selling exp.	100 000 F	100 000 F	100 000 F	100 000 F	100 000 F	500 000 F
*Total seling and Admin. Costs*	*1 050 000 F*	*1 050 000 F*	*1 200 000 F*	*1 000 000 F*	*1 000 000 F*	5 300 000 F

*total costs*	*4 452 554 F*	*4 661 954 F*	*4 589 824 F*	*4 706 184 F*	*5 309 454 F*	23 719 971 F
Units produced	10 000	10 000	10 000	10 000	10 000	50 000 F
*daily unit cost*	445 F	466 F	459 F	471 F	531 F	474,3994274
Mean unit cost	474 F

Source: The author

From the figures above, it appears that the unit cost is 474 F for the week under consideration using the absorption costing technique. This figure represents one of the mean that will be compared during the process of testing our hypotheses.

Since we are dealing with job costing, the best method of determining that unit cost is through the use of a Job cost Sheet like the following:

JOB COST SHEET: Absorption costing
Job number: 1		Start date: 01st august 2002
Department: printing		Delivery date: 05th august 2002
Item: Five-day production of CT		Units completed: 50 000

Direct Materials
Requisition N°	Amount	type of labour	ticket	Hours	Amount
paper 100	6 158 250 F	direct labour for pre-printing	1	39,5	237 000 F
black ink 101	700 000 F	direct labour for copy	2	9,8	24 500 F
blue ink 102	100 000 F	direct labour for soaking	3	14	84 000 F
red ink 103	150 000 F	direct labour for printing works	4	14	630 000 F
yellow ink 104	100 000 F	direct labour for edition	5	35	510 000 F
photographic sheet 104	2 500 000 F	Total C/F			1 485 500 F
photographic film 105	300 000 F
Sheet Developer 106	396 000 F	EXPENSES			Manufacturing Overheads
Film developer 107	45 000 F	Description	Amount		Type	Hours	Rate	Amount
Film fixing liquid 108	45 000 F	fixed admin. Exp.	2 500 000 F		water	80	845 F	67 600 F
sheet proofreader 109	10 800 F	variable admin. Exp.	1 350 000 F		electricity	80	2 625 F	210 000 F
eraser 110	16 000 F	variable selling exp.	950 000 F		depreciation	80	55 962 F	4 476 921 F
soaking solution 111	120 000 F	fixed selling exp.	*500 000 F*		spare parts	80	5 162 F	418 000 F
sheet cleaner 112	62 400 F	Total C/F	5 300 000 F		Total C/F			5 172 521 F
tracing paper 113	50 000 F
photocopy paper A4 114	90 000 F
photocopy paper A3 115	17 500 F	Job cost Summary
transparent sellotape 116	1 400 F	Direct materials	11 761 950 F
packaging sellotape 117	5 600 F	Direct Labour	1 485 500 F
packaging string 118	13 500 F	Manufacturing Overheads	5 172 521 F
white glue 119	3 500 F	Selling and Admin. Exp.	5 300 000 F
industrial rag 120	70 000 F	Total Cost	23 719 971 F
soap paste 121	3 000 F	Unit product cost	474 F
toner cartridge HP1200 122	720 000 F
toner cartridge HP5000 123	54 000 F
toner cartridge HP8500-black124	6 000 F
toner cartridge HP8500-blue 125	6 000 F
toner cartridge HP8500-Red 126	6 000 F
toner cartridgeHP8500-yellow 127	6 000 F
drummer KitC4153A 128	6 000 F
Total C/F	11 761 950 F

We also need the standard deviation of the daily unit cost and this can be obtained from the formula:

B. MARGINAL COSTING

Table 4-10 Marginal costing for the determination of the unit cost of Cameroon Tribune (income statement format) VARIABLE COSTING FOR THE DETERMINATION OF THE UNIT COST OF THE NEWSPAPER
	MONDAY1	TUESDAY 1	WEDNESDAY1	THUSRDAY1	FRIDAY1	Totals
COST
DIRECT MATERIALS
paper	1 231 650 F	985 320 F	1 231 650 F	1 231 650 F	1 477 980 F	6 158 250 F
black ink	150 000 F	140 000 F	120 000 F	140 000 F	150 000 F	700 000 F
blue ink	20 000 F	20 000 F	20 000 F	20 000 F	20 000 F	100 000 F
red ink	30 000 F	20 000 F	40 000 F	30 000 F	30 000 F	150 000 F
yellow ink	20 000 F	10 000 F	10 000 F	30 000 F	30 000 F	100 000 F
photographic sheet	500 000 F	500 000 F	500 000 F	500 000 F	500 000 F	2 500 000 F
photographic film	60 000 F	60 000 F	60 000 F	60 000 F	60 000 F	300 000 F
Sheet Developer	79 200 F	99 000 F	59 400 F	59 400 F	99 000 F	396 000 F
Film developer	9 000 F	4 500 F	13 500 F	4 500 F	13 500 F	45 000 F
Film fixing liquid	4 500 F	4 500 F	13 500 F	9 000 F	13 500 F	45 000 F
sheet proofreader	1 080 F	3 240 F	2 160 F	2 160 F	2 160 F	10 800 F
eraser	3 200 F	3 200 F	3 200 F	3 200 F	3 200 F	16 000 F
soaking solution	30 000 F	18 000 F	24 000 F	24 000 F	24 000 F	120 000 F
sheet cleaner	12 480 F	9 360 F	10 920 F	10 920 F	18 720 F	62 400 F
tracing paper	10 000 F	5 000 F	15 000 F	5 000 F	15 000 F	50 000 F
photocopy paper A4	20 000 F	15 000 F	25 000 F	15 000 F	15 000 F	90 000 F
photocopy paper A3	3 500 F	1 750 F	1 750 F	5 250 F	5 250 F	17 500 F
transparent sellotape	280 F	280 F	280 F	280 F	280 F	1 400 F
packaging sellotape	1 120 F	1 120 F	1 120 F	1 120 F	1 120 F	5 600 F
packaging string	2 700 F	2 700 F	2 700 F	2 700 F	2 700 F	13 500 F
white glue	700 F	700 F	700 F	700 F	700 F	3 500 F
industrial rag	14 000 F	14 000 F	14 000 F	14 000 F	14 000 F	70 000 F
soap paste	600 F	600 F	600 F	600 F	600 F	3 000 F
toner cartridge HP1200	120 000 F	120 000 F	180 000 F	60 000 F	240 000 F	720 000 F
toner cartridge HP5000	10 800 F	9 000 F	7 200 F	12 600 F	14 400 F	54 000 F
toner cartridge HP8500-black	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F
toner cartridge HP8500-blue	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F
toner cartridge HP8500-Red	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F
toner cartridgeHP8500-yellow	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F
drummer KitC4153A	1 200 F	1 200 F	1 200 F	1 200 F	1 200 F	6 000 F
Total cost of direct materials	2 340 810 F	2 053 270 F	2 362 680 F	2 248 080 F	2 757 110 F	11 761 950 F

Direct labour
direct labour for pre-printing	48 000 F	42 000 F	48 000 F	42 000 F	48 000 F	228 000 F
direct labour for copy	5 000 F	4 500 F	4 500 F	5 000 F	5 000 F	24 000 F
direct labour for imposition	18 000 F	15 000 F	18 000 F	15 000 F	18 000 F	84 000 F
direct labour for printing works	135 000 F	112 500 F	135 000 F	112 500 F	135 000 F	630 000 F
direct labour for edition	102 000 F	102 000 F	102 000 F	102 000 F	102 000 F	510 000 F
Total labour costs	308 000 F	276 000 F	307 500 F	276 500 F	308 000 F	1 476 000 F

Variable factory overhead costs
water bills (variable)	14 000 F	12 000 F	15 000 F	13 600 F	13 000 F	67 600 F
electricity bills (variable)	42 000 F	45 000 F	40 000 F	43 000 F	40 000 F	210 000 F
spare parts (variable)	85 000 F	100 000 F	110 000 F	60 000 F	63 000 F	418 000 F
Total Variable factory exp.	141 000 F	157 000 F	165 000 F	116 600 F	116 000 F	695 600 F

Variable cost of goods to be sold	2 789 810 F	2 486 270 F	2 835 180 F	2 641 180 F	3 181 110 F	13 933 550 F

Variable selling and admin. Costs
variable admin. Exp.	250 000 F	300 000 F	350 000 F	250 000 F	200 000 F	1 350 000 F
variable selling exp.	200 000 F	150 000 F	250 000 F	150 000 F	200 000 F	950 000 F
Total variable selling and admin. Exp.	450 000 F	450 000 F	600 000 F	400 000 F	400 000 F	2 300 000 F

*Total cost of goods sold*	*3 239 810 F*	*2 936 270 F*	*3 435 180 F*	*3 041 180 F*	*3 581 110 F*	16 233 550 F
Units produced	10 000	10 000	10 000	10 000	10 000	50 000 F

*Daily unit cost*	324 F	294 F	344 F	304 F	358 F	325 F

JOB COST SHEET: Marginal costing
Job number: 1		Start date: 01st august 2002
Department: printing		Delivery date: 05th august 2002
Item: Five-day production of CT		Units completed: 50 000

Direct Materials		Direct Labour
Requisition N°	Amount	Type of labour	Ticket	Hours	Amount
paper 100	6 158 250 F	Direct labour for pre-printing	1	39,5	228 000 F
black ink 101	700 000 F	Direct labour for copy	2	9,8	24 000 F
blue ink 102	100 000 F	Direct labour for soaking	3	14	84 000 F
red ink 103	150 000 F	Direct labour for printing works	4	14	630 000 F
yellow ink 104	100 000 F	Direct labour for edition	5	35	510 000 F
photographic sheet 104	2 500 000 F	Total C/F			1 476 000 F
photographic film 105	300 000 F
Sheet Developer 106	396 000 F	EXPENSES			Manufacturing Overheads
Film developer 107	45 000 F	Description	Amount		Type	Hours	Rate	Amount
Film fixing liquid 108	45 000 F				Water	80	845 F	67 600 F
sheet proofreader 109	10 800 F	Variable admin. Exp.	1 350 000 F		Electricity	80	2 625 F	210 000 F
eraser 110	16 000 F	Variable selling exp.	950 000 F		Spare parts	80	5 162 F	418 000 F
soaking solution 111	120 000 F
sheet cleaner 112	62 400 F	Total C/F	2 300 000 F		Total C/F			695 600 F
tracing paper 113	50 000 F
photocopy paper A4 114	90 000 F
photocopy paper A3 115	17 500 F	Job cost Summary
transparent sellotape 116	1 400 F	Direct materials	11 761 950 F
packaging sellotape 117	5 600 F	Direct Labour	1 476 000 F
packaging string 118	13 500 F	Manufacturing Overheads	695 600 F
white glue 119	3 500 F	Selling and Admin. Exp.	2 300 000 F
industrial rag 120	70 000 F	Total Cost	16 233 550 F
soap paste 121	3 000 F	Unit product cost	325 F
toner cartridge HP1200 122	720 000 F
toner cartridge HP5000 123	54 000 F
toner cartridge HP8500-black124	6 000 F
toner cartridge HP8500-blue 125	6 000 F
toner cartridge HP8500-Red 126	6 000 F
toner cartridgeHP8500-yellow 127	6 000 F
drummer KitC4153A 128	6 000 F
Total C/F	11 761 950 F

Given all these information that can be summarised in the following table, we can now start with the analysis part of this chapter.

VII. ANALYSIS OF THE DATA

In this part, our work will be focused on testing the hypotheses outlined in the first chapter; for this, we will use the student's T-test. This test is concerned with analysing the difference in means; in our case, the two means are the weekly unit cost obtained using absorption and marginal costing.

In the previous chapter, explanations have been given on the above concepts; we therefore do not need to dwell on it again. As such, we have the following:

The difference in the two means is therefore normally distributed with the following parameters:

At this level, it is now possible to test the hypotheses, which were stated as follows:

H_o: (Null hypothesis) A₁-A₂=0, there is no difference between the sample means and both can be used for the same purposes.

H₁: (Alternative Hypothesis) A₁-A₂?0 the two sample means are different and cannot be used for the same purposes.

Given the test statistic Tc and the critical value T_á/2,n1+n2-2to be calculated,

From the statistical tables, we therefore have: t_á/2
,8=2.306 or : t_{á/2 ,8=}-2.306 A1=474

The critical value previously obtained was 2.306, which is less than the test statistic obtained: Tc>T_{á/2, n1+n2-2.}This leads us to reject the null hypothesis stating that: there is no difference between the sample means and both can be used for the same purposes. And we accept the alternative hypothesis stating that: the two sample means are different and cannot be used for the same purposes.

This conclusion ends our presentation and analysis of the data collected at SOPECAM, and helps us to directly enter into the problem of the lessons and conclusion to draw from this study, which is the main concern of the next chapter.

CHAPTER FIVE:

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

I. SUMMARY OF FINDINGS

As we are heading towards the end of the study entitled «The use of Job costing as a tool for the pricing process», it seems necessary to recall its objectives. This study was conducted for the sake of coming out with a reliable unit cost figure for the newspaper «Cameroon Tribune»; it was also designed to help in the determination of a good allocation basis for the company overhead costs and finally, while engaging in this research work, we wanted to improve the pricing and cost control processes at SOPECAM.

The research, as mentioned above was conducted at SOPECAM, a State-owned enterprise, responsible of the publishing of the newspaper Cameroon Tribune. Data have been collected from primary and secondary sources constituted by the results of interviews conducted at the company premises with its executives and data gathered from the financial and accounting statements of the company. These data were analysed using job costing associated to the absorption and marginal costing techniques. The results of this analysis were interpreted using the Student's -T- test. It was found that under absorption costing, the unit cost of the newspaper is FCFA 474, while under marginal costing, it was estimated at FCFA 325.

After having tested the hypotheses of the study, we came to the conclusion that the two costing techniques used namely marginal and absorption costing, cannot be used for the same purposes.

In Marginal costing, the company is only concerned with the costs directly related to the product, the fixed production and non-manufacturing costs are not taken into account, it is therefore preferable to use this technique when trying to control the costs associated with a particular product. It must as such be used for the cost control programmes instead of the pricing decisions.

Concerning Absorption costing, with this technique, all the costs incurred when manufacturing a product are taken into account, this costing technique enables the company to ascertain with accuracy what it cost the entire organisation to make a particular product. It relates to the overall profitability of the company and for this reason, we must use this technique for the pricing decision.

II. CONLUSIONS

After having reviewed the results of the study, we must normally derive a conclusion from the information obtained. This conclusion will stem from some remarks we have made throughout the study.

The first point to mention at this level is that the newspaper under study is currently being sold at FCFA 300, which means from our findings, that the company is under-pricing its product.

The second point to mention is that, although the production of the newspaper is divided into three stages as explained in the previous chapter, the method of allocating the manufacturing costs of the product using hourly rates as done by the company seems not to be very adequate for this product.

The third point of interest concerns the overhead allocation bases. In the company, labour hours are used to assign and allocate overhead costs to the various products, but from the observation of the researcher, it seems as if the labour hours rarely change and can be treated as fixed costs; This is mainly due to the fact that the company workers are all salaried worker and none of them is employed on an hourly basis, thus the labour hours are not a good yardstick as far as the spreading of overhead costs over production units is concerned.

Another element of consideration in the analysis concerns the cost structure of the company. When we decided to determine the unit cost of this product it was not just for the sake of having a unit cost figure, but it was also to examine the various components of that unit cost and their relative importance as this may help us in determining the real cost centres of the enterprise. From the analysis performed in the previous chapter, the following results have been obtained:

Figure 5-1 Relative importance of the cost components in SOPECAM's cost Structure (absorption costing).

Figure 5-2 Relative importance of the cost components in SOPECAM's cost structure (marginal costing).

Having outlined our points of interest, we can now draw some conclusions as far as our study is concerned.

One of the initial goal of this study was the determination a reliable unit cost figure for the newspaper Cameroon tribune, it has appeared using absorption costing that the unit cost could be estimated at FCFA 474 which as mentioned above is greater than the selling price of the product. As such, it appears that the company is not following a profit-maximisation goal when producing Cameroon Tribune, its main focus appears to be the provision of daily, reliable and accurate information to the Cameroonian population; and for this to be done, instead of maximising their profit, or taking advantage of their position of leader of the market because they are the only daily newspaper in Cameroon with the exception of the newspaper «Mutations», they prefer to achieve a Goodwill preservation objective by making sure that they remain at the level of the mean-income earner in Cameroon. This goal of goodwill and image preservation is identified by Harper (1989)^25(*) as strategy Pricing; the firm goal here is not so much profit maximisation but the achievement of the long-term goal of the firm from the marketing point of view, that is the satisfaction of the customer. This situation may lead us to question ourselves about the survival of the company, but since Cameroon Tribune is not the only product manufactured at SOPECAM, and since SOPECAM is benefiting from the Sate endowments and subsidies, we can say that the company is not supposed to face a situation of jeopardy because of the production of Cameroon tribune.

Another objective of the study was the determination of the right allocation basis for the overhead costs of the company. As previously mentioned, the company currently uses the labour hours as allocation rates for the company costs, and also it is important to mention the absence of a managerial accounting department in the company which should have taken care of such a problem; from our study, we realised that most of the processes depend a lot on the effective functioning of specific machines and most of the labour costs incurred by the company are quite fixed since all the employees of the company are salaried workers and not wage earners. As such, it seems advisable to make use of the machine-hours instead of the labour-hours as the basis for the allocation of the overhead costs in the company.

Concerning the cost structure of SOPECAM, it appears from the results of our study that the company should continuously monitor the materials costs as they appear to be the most important component of the unit cost, they represent 48%and 73% of the total cost when using absorption and marginal costing respectively. The company management should also take into consideration the relatively small share of the labour cost (6% and 9%) in the cost structure. This quite small share may be a good indicator of the declining importance of that cost in the company, which may lead the management to make decisions about the overhead allocation bases.

These appreciations the current functioning of SOPECAM directly introduce into the next heading, which is about the recommendations that we could make in order to improve the processes at SOPECAM.

III. RECOMMENDATIONS

The recommendations to be made from the results of this study are centred around one main point: the Managerial accounting department.

v The sketch-determination of the unit cost of Cameroon-tribune that has been achieved by this study, is normally part of the work to be achieved in a managerial accounting department, the determination of the allocation bases for the overhead costs of the company are also the concern of such a department; we therefore recommend the management of SOPECAM to establish and make operational a managerial accounting department in order for them to have accurate indicators of their profitability.

v This managerial accounting department will be encouraged to use the job costing method when trying to cost the printing works of SOPECAM, as it is an important tool for pricing and cost control (Maher & Deakin, 1994^26(*)). This is because customers always ask fro estimates in advance and they award jobs on a competitive basis, consequently, SOPECAM must be able to estimate costs accurately if they are to compete and make a profit.

v Concerning the selling price of Cameroon Tribune, unless it is part of the governmental policy, we wish to propose an increase in its selling price. This will enable the company to prepare itself to the possible shortage of funds from the government.

v As one could have mentioned, we have just made estimates of the editorial labour costs, selling and distribution expenses of the newspaper. The company must therefore endeavour to keep accurate data about all these expenses, for they are all part of the unit cost of the product.

v Another recommendation to be added is at the level of the cost structure of the company; since the labour costs are not that much important as the management of the company tend to believe, we recommend the company to look for another allocation basis for its overhead costs. Because of the relative importance of the material costs, it may be possible to investigate their composition in order to have a deeper insight into the cost structure of the company and therefore the into the real causes of the incurrence of costs by the company.

IV. LIMITATIONS OF THE STUDY

The scope of this study has been continuously narrowed down because of many factors, namely:

The time constraint; such a study normally requires enough time to analyse in detail all the processes involved in the production and distribution of the product, but here we have been obliged to limit our research because of the shortage of the time resource.

By far the most limiting factor to the effective conduct of the research work, the financial resources did not enable us to make a thorough collection and analysis of data as we wished.

Finally, the scarcity of empirical studies on job costing did not help us in the process of making this research work an improvement of former studies.

V. PROPOSITIONS FOR FURTHER STUDIES

For this research work to be complete, other studies need to be conducted on the following topics or areas:

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The use of job costing as a tool for the pricing and cost control decisions in the printing industry: the case of Société de Presse et d'Editions (SOPECAM)

TABLE OF CONTENT:

Declaration..................................................................................i