THE IMPACT OF STANDARD COSTING ON THE FINANCIAL PERFORMANCE OF LISTED CONSUMABLE GOODS COMPANIES IN NIGERIA
Abstract
The objective of this study is to examine the impact of standard costing practices on the financial performance of listed consumable goods companies in Nigeria. The study aims to investigate how profit margin improvement, cost variance reduction, and inventory management, influenced by standard costing, affect the return on assets (ROA) of Listed Consumable Goods Companies in Nigeria. The study employed a quantitative research method using secondary data from financial statements and annual reports of listed consumable goods companies in Nigeria. A sample of companies was selected based on specific criteria, and relevant financial data was collected for analysis. A linear regression model was used to assess the relationship between the implementation of standard costing practices and the return on assets, controlling for firm size and firm leverage:
The regression analysis revealed that the implementation of standard costing practices has a significant positive impact on the return on assets (ROA) of listed consumable goods companies in Nigeria. The coefficient for the standard cost variable was statistically significant (p < 0.001), indicating a strong relationship between standard costing practices and financial performance. However, the control variables, firm size and firm leverage, did not show a significant impact on ROA. The study findings suggest that profit margin improvement, achieved through effective cost management using standard costing, leads to higher returns on assets. Additionally, reducing cost variances through standard costing practices contributes to improved financial performance. Although inventory management was not directly analyzed, it is expected that the implementation of standard costing also enhances inventory management practices, leading to overall cost reduction and improved financial performance.
The study concludes that the implementation of standard costing practices has a positive impact on the financial performance of listed consumable goods companies in Nigeria. specifically on their return on assets.
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