Natnael Asfaw Research

A senior research paper on assessment of cost control system
(A case study of Free Flour Factory Dire Dawa city)
A senior research paper submitted to the department of accounting

and finance for the partial fulfillment of the requirement of the
degree of Bachelor of art (BA) in Accounting and Finance.
Prepared by:-……………………………………………………Natnael Asfaw
Id no:-…………………………………………………………….594/13
Name of Advisor: Ashu.G (MSC)
Haramaya University
College of Business and Economics
Department of Accounting and Finance
January, 2024
Dire Dawa, Ethiopia

A senior research paper of Assessment of cost control system (case study of Free Flour Factory Dire Dawa city )
A senior research paper on Assessment of cost control system

(Case study of Free Flour Factory Dire Dawa city)
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Department of Accounting &

Finance
Contents
List of tables............................................................................................................................................v
Abstract...................................................................................................................................................iii
Acknowledgment.........................................................................................................................................iv
Chapter One...............................................................................................................................................1
1. Introduction...........................................................................................................................................1
1.1Back ground of the study....................................................................................................................1
1.2 Statement of the problem...................................................................................................................3
1.3 Research question..............................................................................................................................4
1.4.1 General objective........................................................................................................................5
1.4.2 Specific objectives......................................................................................................................5
1.5 Significance of the study...................................................................................................................5
1.6 Scope of the study..............................................................................................................................6
1.7 Organization of the paper..................................................................................................................6
2. Literature review...................................................................................................................................7
2.1Meaning of cost and cost control........................................................................................................7
2.2Cost control techniques.......................................................................................................................9
2.2.1. Cost reduction............................................................................................................................9
2.2.2. Cost accounting.......................................................................................................................10
2.2.3. Budget and Budgetary control.................................................................................................10
2.2.4. Earned value management.......................................................................................................11
2.2.5. Outsourcing.............................................................................................................................11
2.3. Cost control methods and strategies................................................................................................11
2.3.1. Planning the budget properly...................................................................................................12
2.3.2. Monitoring all expenses using checkpoints..............................................................................12
2.3.3. Using change control systems..................................................................................................12
2.3.4. Having time management........................................................................................................12
2.3.5 Tracking earned value...............................................................................................................13
Cost control strategies...........................................................................................................................13
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2.3.6 Inventory management.............................................................................................................13

2.3.7 Supplier management...............................................................................................................13
2.3.8 Process optimization.................................................................................................................13
2.3.9 Waste reduction........................................................................................................................13
2.3.10 pricing strategies.....................................................................................................................13
2.4Cost control and manufacturing stages.............................................................................................14
2.4.1 Raw Material Procurement.......................................................................................................14
2.4.2 Production Planning and Design...............................................................................................14
2.4.3 Inventory and Material Handling..............................................................................................14
2.4.4 Production Process....................................................................................................................14
2.4.5 Quality Control.........................................................................................................................15
2.4.6 Finished Goods Storage and Distribution.................................................................................15
2.5Classification of cost........................................................................................................................15
2.5.2 Fixed and variables cost............................................................................................................16
2.5.4 Controllable and non controllable costs....................................................................................16
2.5.5 Relevant cost and irrelevant costs.............................................................................................16
2.5.6 Relationship of the costs to the products...................................................................................16
2.6 Empirical literature review..............................................................................................................17
2.7 Gap in previous studies....................................................................................................................19
CHAPTER THREE...............................................................................................................................20
3. RESEARCH METHODOLOGY.......................................................................................................20
3.1. Research Design.............................................................................................................................20
3.2. Research approach..........................................................................................................................21
3.3. Population.......................................................................................................................................21
3.4. Sampling design.............................................................................................................................21
3.5. Sample size.....................................................................................................................................22
3.6. Data Type data source....................................................................................................................22
3.4 Method of data collection................................................................................................................22
3.5 Methods of data analysis and interpretation.....................................................................................23
3.6 Ethical Considerations.....................................................................................................................23
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4. Time and Budget Plan.........................................................................................................................24

4.1 Time Plan........................................................................................................................................24
4.2 Budgeted Cost.................................................................................................................................25
Bibliography...............................................................................................................................................26
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List of tables
Table 4.1 Time Plan
Table 4.1 Time Plan………………………………………………………….………….24
Table 4.3 Budget and Cost plan………………………………………….………….25
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Abstract
This research proposal focuses on the assessment of cost control systems in Free Flour Factory
located in Dire Dawa City. The introduction provides a background of the study, highlighting the
importance of cost control in businesses. The statement of the problem identifies the need to
evaluate the effectiveness of the current cost control system in the factory. Even if the scope of
the study is limited to Free Flour Factory in Dire Dawa city the study aims to identify the
existing cost control systems, evaluate its effectiveness, and on proposing recommendations for
improvement. The research will be conducted using a case study approach, supplemented with a
review of theoretical and empirical literature; the gap in previous studies is attempted to be
identified, leading to the need for this research. The specific objectives of the study include
identifying the cost control mechanisms in place, evaluating the effectiveness of the existing cost
control systems, and plans on proposing recommendations for improvement. The significance of
the study lies in its potential to provide insight into cost control strategies for Free Flour
Factory. The research methodology will involve a mixed research design, with data collected
through questionnaires, interviews, and document analysis. The sample size will be determined
using purposive non random sampling techniques. The study's findings are expected to shed light
on the current cost control practices in the Free Flour Factory and provide recommendations for
improvement. Finally, the study's time plan and budgeted cost are outlined to ensure efficient
and timely completion of the research.
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Acknowledgment
First of all I prize to almighty God for his blessing and help throughout my academic life. Next I
would like to express my deepest gratitude for my advisor Mr. Ashu Girma for his constructive
comments and professional guidance starting from the beginning to the end of this proposal
development. Third I would like to express my deepest gratitude to my family supported
financially and morally. Fourth I would like to tanks to management employees and owners of
Free Flour Factory for agreeing to give their precious time to be part of the proposed study, fifth
my heartfelt appreciation needs to be given to my class mates. Finally, my heartfelt thanks given
to all of the accounting and finance teachers, for making me how I am right now.
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Chapter One
1. Introduction
1.1Back ground of the study

Cost control is the process of identifying, eliminating or reducing unnecessary business expenses
in order to increase profits. Cost control starts with the budgeting process and looks at vendor
selection and negotiation, leveraging early payment and volume discounts, using spend
management systems, and improving manufacturing or construction efficiency and product
quality. Cost control lies at the heart of financial success for any organization. In today's rapidly
changing business landscape, where economic uncertainties and resource constraints prevail,
effectively managing and optimizing costs can be the difference between survival and thriving.
However, despite its critical importance, many organizations struggle to assess and enhance their
cost control systems effectively (tipalti.com, 2018).
This research paper delves into the captivating world assessment of cost control in case of Free
flour factory, unraveling the intricacies of measuring its efficiency, effectiveness, and impact on
overall financial performance. By peering beneath the financial surface, we seek to unearth
valuable insights that will not only empower organizations to navigate the complexities of cost
control, but also pave the way towards sustainable growth and competitiveness in an ever-
evolving marketplace.
Cost control is like playing a game where you try to spend less money so you can make more
money (Taylor, 2008). It's important for businesses to do this because it helps them make more
profit. Cost control is a big and important part of running a business well. It shows how good the
people in charge are at managing the company, and it helps the company be better than its
competitors. Businesses always need to think about cost control, no matter what stage they're in.
It's a constant thing that needs to be worked on and improved. Management uses cost control to
figure out ways to be more efficient and save money. (investopedia.com, 2020).
Cost control is a practice used by finance professionals that analyzes a business's overall
expenses and reduces project costs to increase profit. Typically, a company hires finance
professionals to monitor their cost performance, plan a budget for each project and change
projects that can increase a business's financial performance (www.indeed.com, 2020). The
findings of this study will provide valuable insights into the effectiveness of cost control systems
in Free Flour Factory and help them identify areas of improvement. The study will also
contribute to the existing body of knowledge on cost control and provide practical
recommendations for the organization to enhance their cost control practices.
Cost accounting is applied primarily to manufacturing organization that compiles and process
row material into finishing products. The major factor in business planning is the cost of
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producing the company’s products in order to achieve major goals of the business. Today in the
competitive market customers have a need for quality goods and products that are delivered
when they need them and at the exact price heighted Cost control is vital for organizations for
multiple reasons. It helps maximize profitability by optimizing expenses, enabling businesses to
generate higher profits and improve financial performance with meeting customer demand as the
prior goal of organization (Hendrickson, 1989).
As a result manufacturing companies are under constant pressure to reduce cost and provide
higher quality supply of products. In practice supporting the goals of reducing cost without
compromising quality product’s is to understand cost behavior to closely control cost. Detailed
cost accounting system an important requirement for systematic cost control and decision
making to make intelligent decision manager want reliable measurement.
Cost control systems that do not provide reliable information do not help managers in making
decision without reliable cost information decision can be absolutely harmful. For this reason the
management must understand the nature and behavioral elements of costs. Manufacturing
enterprise grows and mature their managerial control system involved with the volume and
complexity of operation. A system of control begins with a set of historical records. Financial
results of the current period compared with the results of prior differences are noted and causes
of the deference are investigated. Following such analysis managerial action can be taken to
correct unfavorable situations or to promote favorable results (DixonCooper, 2019).
In manufacturing companies the largest deduction from sales is cost of goods sold to determine
net income. Combined financial accounting is based on accrual base accounting where as cost
accounting emphasizes or the further and deals with cost behavior, cost ascertaining and cost
control (HaroldBierman, 2010). Therefore manufacturing firm should give due attention for cost
accounting cost control service as a tool that improves management decision it’s also major
means of helping manager to administer each of services of an organization.
Free Flour Factory is one of the manufacturing companies. It is engaged in the production of
finished products form a combination of raw materials. So it will be great importance for such
firms to adopt a well developed cost control system. Considering the huge amount of input in
raw material and labor, so having a good cost control system helps manager for decision making
that helps towards achieving organization objective.
Conducting research on the assessment of cost control in a factory can yield valuable insights
and contribute to the overall improvement and success of the organization. There are several
rationales for undertaking such research. Firstly, it enables the identification of potential areas
for cost reduction and process optimization. By evaluating the effectiveness of existing cost
control measures and identifying any inefficiencies or areas of improvement, the research can
provide valuable recommendations for enhancing cost control practices within the factory.
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Secondly, the research can shed light on the impact of cost control on the financial performance
of the flour factory.
Understanding the relationship between cost control efforts and profitability can help the
organization make informed decisions and strategic investments, ultimately leading to improved
financial results. Additionally, the research can contribute to industry knowledge and best
practices by sharing insights and findings with other flour factories and stakeholders, fostering
collaboration and promoting advancements in cost control methodologies. Ultimately,
conducting research on the assessment of cost control in a Flour Factory serves as a proactive
approach to continuously improve operations, optimize resource utilization, and drive sustainable
growth in an increasingly competitive market.
Overall the study will focus on analyzing the current cost control practices of Free Flour Factory
and evaluating their impact on the financial performance of the company. The study will also
examine the challenges faced by organization in implementing cost control systems and identify
best practices that can be adopted to overcome these challenges. Cost control is really important
for businesses because it helps them make money and keep going. In order to do well in a
competitive world, companies need to have a good system for managing their money and using
their resources wisely. This research project is going to look at how well companies are doing
this and find ways to help them do even better.
1.2 Statement of the problem

The Free Flour Factory, an organization that is found in Dire Dawa city administration, has
consistently strived to implement various strategies to maintain financial stability, enhance
operational efficiency, and drive sustained profitability any business organization does. So the
organization needs a comprehensive examination of the assessment of cost control practices
within the factory. A thorough review of the existing literature reveals a noticeable gap
concerning the specific context of cost control in flour factories, particularly with regard to the
practices and experiences of the flour factories. The available literature lacks a comprehensive
understanding of the unique complexities, strategies, and best practices associated with cost
control in the specific context of production, hindering the organization's ability to effectively
optimize cost control processes and achieve higher levels of efficiency and profitability
(Richard_JSchonberger, 2010).
This identified gap in the literature highlights the urgent need for conducting research on the
assessment of cost control in the Free Flour Factory. The research aims to bridge the theoretical-
practical divide by closely examining the existing cost control measures implemented by the
organization, identifying the challenges confronted, and proposing targeted strategies for
improvement. The study will comprehensively explore various key factors, including labor costs,
material expenses, production processes, inventory management, and stringent quality control, to
evaluate the effectiveness of cost control at each stage of the flour production process.
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In conclusion, it is evident that conducting research on the assessment of cost control in the Free
Flour Factory is both pertinent and necessary. Addressing the identified gap in literature will
provide the organizations like Free Flour Factory with a unique opportunity to optimize there
cost control strategies, fortify financial stability, enhance operational efficiency, and elevate its
competitive positioning within the flour industry. Moreover, the findings derived from this study
will contribute to the broader knowledge base surrounding cost control practices within the
specific context of flour manufacturing, benefiting not only the Free Flour Factory but also other
players in the industry seeking to improve their cost control mechanisms.
According to a paper published in 2001 by Charoenngam, in order to fully comprehend cost

control systems in practice, it is necessary to evaluate both the effectiveness and shortcomings of
traditional systems in comparison to more effective ones. The study found that two key factors
that differentiate effective cost control systems from traditional ones are the advancement of the
cost control framework and the systematic participation of site personnel in cost control. These
findings suggest that in order to improve cost control practices, it is important to implement more
advanced frameworks and involve site personnel in the process.
According to Lou.et(2010) analyzes the factors affecting cost control in railway construction
projects. The authors conclude that effective cost control is not only from the micro-level in the
whole process of railway construction projects but also from the macro-level (institution) and
meso-level (governance). They establish a model of cost control from meso-micro levels of
railway construction projects.
1.3 Research question

The research aims to explore the assessment of cost control practices within the context of the
Free Flour Factory. By examining the effectiveness of existing cost control measures and
identifying areas for improvement, the study seeks to develop strategies and recommendations to
optimize resource allocation and drive financial stability and profitability. The research question
revolves around addressing the specific challenges and opportunities within the Free Flour
Factory, ensuring its long-term success in a competitive market. These questions cover various
aspects of cost control, ranging from practices and challenges to measurements, strategies, and
future considerations. The study aims to provide insights and recommendations for optimizing
cost control within the organization. Basically the study asks “How effective is the current cost
control system in achieving cost management objectives and financial stability?”
1. What is the current cost control practices implemented within the organization in
accordance to techniques, strategies and methods?
2. What are the major constraints of the cost control system in the company and how it affects
and how satisfied are employees with the system currently?
3. How does the organization measure and evaluate the correlation between the level of cost
control implementation and its overall financial performance?
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4. How does the organization allocate resources and prioritize cost control initiatives?
5. How can technology and automation contribute to enhancing cost control practices within
the organization according to the employee’s opinion?
1.4 Objective of the study

1.4.1 General objective
General objective of the research is to examine the Assessment of cost control system (case of
Free Flour Factory Dire Dawa city)
1.4.2 Specific objectives

1. To determine current cost control practices implemented within the organization in
accordance to techniques, strategies and methods.
2. To investigate what are the major constraints of the cost control system in the company and
how it affects and how satisfied are employees with the system currently.
3. To investigate how the organization measure and evaluate the correlation between the level
of cost control implementation and its overall financial performance.
4. To investigate the way that the organization allocates resources and prioritizes cost control
initiatives.
5. To investigate how technology and automation contribute to enhancing cost control
practices within the organization according to the employee’s opinion.
1.5 Significance of the study

Studying the assessment of cost control in a Free flour factory, particularly holds significant
importance for the researcher in the achieving the desired level of competency that is expected
from an accounting and finance bachelors degree graduate. The significance of this kind of study
will not just be bounded to advantage the researcher it will resonate into contributing to the
literature of this kinds of studies specifically by giving head light to the industry specific
condition of flour production cost control practices, within the Free Flour Factory located in Dire
Dawa City, the significance of this research for the factory itself can be summarized as follows:
1. By conducting a thorough assessment of their cost control system, The study may provide
valuable feedback to the Free Flour Factory's management team, enabling them to make data-
driven decisions around cost control and business strategies.
2. The findings of this study could be used by policymakers to develop guidelines or regulations for
cost control in the manufacturing industry. This could ultimately benefit other businesses by
providing a framework for successful cost control implementation.
3. The research findings could contribute to the literature on cost control systems by providing a
real-world case study that can be referenced in future academic writing. The study could also
identify areas for further research in the field of cost control, which could lead to new insights
and best practices being developed.
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4. The study will provide valuable experience in conducting a comprehensive and detailed analysis
of organizational systems for the researcher. This experience will be transferable to future
research projects and enhance the researcher's skills and knowledge in the field.
5. The study may identify specific cost control measures that have been successful for the Free
Flour Factory in the previous years, which can be replicated in other future times.
6. The study may contribute to the overall body of knowledge on cost control systems, expanding
the understanding and resources available to researchers, managers, and policymakers in the
field.
1.6 Scope of the study

The goal of the study was to thoroughly examine and evaluate the cost control system at the Free
Flour Factory located in Dire Dawa city. The study employed a mixed approach, combining
quantitative and qualitative methods, to conduct a comprehensive analysis of the company's
performance in terms of cost control. The researcher used a case study research design, focusing
exclusively on the Free Flour Factory to ensure accuracy and clarity. The study considered the
geographical location of the case study while conducting the research. The data collection
methods included surveys, interviews, and document analysis. The data type that was used in this
study was primarily quantitative, such as financial reports and performance metrics. However,
qualitative data from interviews with employees and managers was also gathered to provide a
more in-depth understanding of the cost control system. The study aimed to identify the cost
control system of Free Flour Factory and provide recommendations to address any issues
identified.
1.7 Organization of the paper

The study paper is divided into five parts including, the first part which sets the stage for the
study, defining its significance, goals, and relevance within the field. It provides a compelling
rationale for the research and establishes the foundational framework for subsequent
investigations. The second section looks into theories and prior research associated with the
topic, offering a comprehensive understanding of the subject matter. It serves as an essential
knowledge base, providing insights drawn from existing literature to inform the study's approach
and hypotheses. The third part details the methods employed for data collection and analysis; this
section clarifies the research's procedural foundation. It sheds light on the study's design,
sampling techniques, data sources, collection methods, and analytical approaches, ensuring
transparency. The fourth part focuses on the examination and presentation of findings, offering a
clear and organized portrayal of the research outcomes. It showcases the gathered data's analysis,
interpretation, and visual representation, imparting a clear understanding of the study's
discoveries. The final part summarizes the study's key takeaways, summarizing the insights
derived from the research. Additionally, it presents recommendations for future research
endeavors, providing directives for advancing the field based on the study's findings and
identified areas for further exploration.
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Chapter Two
2. Literature review
2.1Meaning of cost and cost control

Cost means more than just how much money something costs. It also includes how much time,
effort, and resources it takes to get it. Knowing the cost helps us to decide if something is doable
and if it will make us money (Horngren's, 2018). There are different types of costs. Some costs
stay the same no matter how much we make or sell. Other costs change depending on how much
we make. Some costs are directly related to one thing we make, while others are spread out over
many things we make.
Opportunity cost is the value of the best thing we give up to get something else. Sunk cost is
money we already spent and can't get back. It's important to know all these different types of
costs so we can manage our money well. It includes all the money spent on materials, workers,
and other things needed to make something. Knowing about cost is important because it helps
businesses make smart choices about how much to charge for things and how much money they
have (HaroldBierman, 2010).
Cost control is when businesses try to spend less money so they can make more money. They do
this by finding ways to spend less on things without making the things worse or making less of
them. To do this, businesses look at all the costs they have and find ways to spend less, like
finding cheaper materials or having fewer workers. Cost control is a practice used by finance
professionals that analyzes a business's overall expenses and reduces project costs to increase
profit. Typically, a company hires finance professionals to monitor their cost performance, plan a
budget for each project and change projects that can increase a business's financial performance
(www.indeed.com, 2022).
It includes all the money spent on materials, workers, and other things needed to make
something. Knowing about cost is important because it helps businesses make smart choices
about how much to charge for things and how much money they have. Cost control is when
businesses try to spend less money so they can make more money. They do this by finding ways
to spend less on things without making the things worse or making less of them. To do this,
businesses look at all the costs they have and find ways to spend less, like finding cheaper
materials or having fewer workers.
In today's dynamic business environment, organizations across various industries strive to

achieve financial stability, operational efficiency, and profitability. One crucial aspect that forms
the foundation of successful business management is the implementation of a robust cost control
system. By accurately understanding and effectively managing costs, organizations can optimize
resource allocation, enhance competitiveness, and drive sustainable growth. This essay delves
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into the concept of cost and explores the significance of a well-designed cost control system in
ensuring the financial success of organizations.
Cost, in the context of business, refers to the monetary value associated with producing goods or
providing services. It involves the expenditure required to acquire and utilize resources such as
labor, materials, equipment, and overhead expenses. Costs can be classified into various
categories, including direct costs (e.g., raw materials) and indirect costs (e.g., utilities,
administrative expenses). Understanding the different types of costs allows organizations to
pinpoint areas where expenses are incurred and analyze their impact on financial performance
(www.investopedia.com, 2021).
A cost control system encompasses the processes, techniques, and strategies employed by
organizations to manage and regulate costs effectively. It involves the systematic tracking,
analysis, and reduction of expenses to align them with predetermined budgets or targets. A well-
designed cost control system enables organizations to identify cost drivers, evaluate cost-
effectiveness, and implement measures for cost reduction and optimization.
A strong cost control system acts as a cornerstone for organizations aiming to achieve financial
stability, operational efficiency, and profitability. By understanding the concept of cost and
implementing effective cost control measures, organizations can optimize resource allocation,
make informed decisions, and drive sustainable growth. A well-designed cost control system
empowers organizations to manage costs proactively, gain a competitive edge, and pave the way
for long-term success in today's complex business landscape (RicardoVargas, 2014).
As cost control refers to the process of monitoring and managing expenses within an
organization to maintain financial stability and achieve profitability. This process involves
identifying and analyzing various cost factors, such as operational expenses, production costs,
and overheads, and implementing measures to reduce or optimize them (happay.com, 2022).
System of standard costing is in operation that cost control measures can give their best. The cost
control aims at reducing in efficiency wastage and setting up predetermined cost and in
achieving them cost control is exercise through setting standards norms or targets and comparing
actual performance (DixonCooper, 2019).
Cost control is essential for businesses as it enables them to maintain a strict budget, ensuring
financial stability and fostering profitability. Setting a budget through cost control methods helps
teams stay on track and complete projects within the defined timeframe. The adherence to budget
deadlines increases employees' motivation to meet project goals. Moreover, utilizing cost control
methods prevents projects from experiencing a rapid increase in costs as they progress. Financial
professionals can be consulted to address any budget gaps that may arise. Ultimately, cost
control measures aim to maintain high profitability by ensuring that project revenue surpasses
project costs, leading to increased financial resources for a company. By implementing effective
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cost control strategies, businesses can align their finances and project outcomes for sustainable
growth and success (BANERJEE_B, 2021).
Cost control is a crucial aspect of effective financial management for organizations across
various industries. It plays a pivotal role in maximizing profitability, improving operational
efficiency, and sustaining long-term competitiveness. In today's business landscape, where
resources are often scarce and the market is highly competitive, having an effective cost control
system is of paramount importance. This research proposal aims to assess the cost control system
of a selected organization, analyzing its efficiency, effectiveness, and the impact it has on overall
financial performance. The findings from this study will provide valuable insights into
optimizing cost control practices and highlight areas for improvement.
2.2Cost control techniques

Cost control techniques are essential for businesses to manage their expenses and maintain
profitability. These techniques involve a range of strategies and tools that help organizations to
monitor and reduce their costs without compromising on the quality of their products or services.
Effective cost control can help businesses to optimize their operations, increase efficiency, and
improve their bottom line. By implementing cost control techniques, businesses can identify
areas where they are overspending, make informed decisions about resource allocation, and
ultimately achieve their financial goals. In this context, it is important for businesses to
understand the various cost control techniques available and how they can be applied to their
specific needs and circumstances (BANERJEE_B, 2021).
2.2.1. Cost reduction

This is about finding ways to spend less money while still making sure things are good quality.
Companies can do things like talk to the people they buy things from to get better deals, make
their processes work better, and use their resources wisely. It's a way for companies to save
money without making their products or services worse. They can do things like make a lot of
things at once, get things for cheaper prices, make things in a simpler way without making them
worse, and use their resources in the best way possible. Saving money is something companies
always try to do by looking at all the different parts of their business and finding ways to make
them better (HaroldBierman, 2010).
Cost reduction means finding ways to spend less money. It is similar to cost avoidance, which
means avoiding spending money in the first place. The goal of both cost reduction and cost
avoidance is to make things cheaper overall. Cost reduction starts at the beginning when
designing a product, so that it doesn't end up being expensive to make. Then, as new chances to
save money come up during production, cost reduction is continues process of getting rid of
things that don't add value during production and also helps to reduce costs.
Cost control and cost reduction are two important ideas in business that are sometimes used to
mean the same thing, but they are actually different. Cost control means keeping track of how
much money is spent and making sure it doesn't go over a certain amount. It also means finding
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ways to spend less money by getting rid of things that aren't needed. Cost reduction means trying
to make everything cost less overall. This can be done by finding cheaper ways to do things or
by getting rid of things that aren't necessary.
Cost control and cost reduction are both ways to help a business save money. They want to spend
less money so they can make more money. The difference is that cost control is about keeping
track of how much money is being spent and trying to stay within a certain budget. Cost
reduction is about finding ways to spend less money overall. Cost control is like reacting to
spending that's already happened, while cost reduction is like stopping unnecessary spending
before it happens. Both cost control and cost reduction are important for businesses to do well in
the market.
2.2.2. Cost accounting

Cost accounting is a way for companies to keep track of all the money they spend when making
things or offering services. It helps them figure out where their money is going and make smart
decisions about how much to charge for their products, where to spend money, and how to
control costs (corporatefinanceinstitute.com, 2018). One popular way to do cost accounting is by
setting standard costs for things like materials, labor, and other expenses. This helps companies
compare what they actually spend to what they planned to spend, so they can fix any problems
and make sure they are being efficient and making money.
Cost accounting is like a special tool that helps businesses keep track of and control their costs. It
involves looking at all the money that a business spends on things like products, services, and
operations. By using cost accounting, businesses can figure out how to spend less money in
certain areas (BANERJEE_B, 2021). This helps them make smart decisions about things like
how much to charge for their products, how to make things, and where to use their resources.
Cost accounting also helps businesses understand how much money they need for different
activities. With this information, businesses can choose where to spend their money wisely to
make the most profit, and also find places where they can save money to be more efficient.
So it’s a powerful tool for cost control, and can help businesses to improve their profitability and
competitiveness. By using cost accounting techniques, businesses can identify areas where costs
can be reduced, and make informed decisions about pricing, production, and resource allocation.
2.2.3. Budget and Budgetary control

In organizations, the budget is like a plan for how much money they expect to make and spend. It
helps them set limits on how much they can spend in different areas and helps them keep track of
their expenses. By comparing what they actually spend to what they planned to spend, they can
fix any problems and make sure they are being responsible with their money. This not only helps
them stay organized financially, but also helps their whole company be successful (Sekhar,
2020). Budgetary control is a way to keep track of expenses and make sure they stay within the
budget. This involves checking on expenses regularly, keeping track of what is actually spent,
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comparing it to the budget, and fixing any issues that come up. By doing this, organizations can
control their costs and meet their financial goals for the long term.
2.2.4. Earned value management

Earned Value Management (EVM) is a comprehensive project management methodology that
harmoniously combines cost, schedule, and performance data to ensure the successful execution
and control of a project (RicardoVargas, 2014). By meticulously tracking the value of completed
work in alignment with the predetermined budget and schedule, EVM empowers organizations
to effectively monitor project costs, evaluate performance levels, and swiftly implement
appropriate corrective measures as needed. This invaluable technique plays a pivotal role in
enabling businesses to maintain a firm grip on their project's financial health, while
simultaneously optimizing resource allocation and fostering proactive decision-making.
2.2.5. Outsourcing
It is the process of delegating specific tasks or functions to external vendors or service providers.
Cost accounting Budgetary control Outsourcing is when a company asks another company to do
certain jobs for them. It is popular because it helps businesses save money and be more efficient.
By hiring outside companies, businesses can save money on things like office space and
equipment (Drury, 2000). They can also get help from experts who know a lot about a specific
job. For example, a small business might hire another company to do their accounting or fix their
computers instead of hiring their own employees. This way, the business can save money and get
really good help. But, it's important for businesses to make sure the outside companies they hire
are good and can do a good job.
2.3. Cost control methods and strategies

Cost control methods refer to the approaches, strategies, and practices implemented by a
company to maintain and track its overall costs effectively. These methods enable organizations
to monitor their expenses and ensure that they align with the established budgets and financial
goals (Duffy, 2012, January). Cost control methods involve various activities, such as setting
budgets, monitoring expenditures, analyzing cost drivers, implementing cost-saving initiatives,
and regularly reviewing financial performance. By employing cost control methods, companies
can identify areas of potential savings, streamline operations, eliminate unnecessary expenses,
negotiate favorable contracts with suppliers, optimize resource allocation, and make informed
decisions to maintain financial stability, enhance profitability, and achieve sustainable growth.
Cost control is an important part of managing a firm. It means being careful with how much
money is spent and making sure it stays within the budget (Taylor, 2008). The budget is like a
plan that tells us how much things should cost, and helps us keep track of what we actually
spend. But just having a budget isn't enough. We also need to use different ways to control costs,
like checking how much progress we've made and if we're spending too much money. By doing
this, we can make sure the project gets done on time and on budget, and that everyone involved
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gets the most value out of it. Here are five cost control methods that allow a company to
maintain and track its overall costs:
2.3.1. Planning the budget properly

When starting a new project, it's important to keep track of how much money you are spending.
This is called budget management. By making a plan for how much money you will need and
how long the project will take, you can stay organized and avoid spending too much. When
making a budget, you need to think about things like how many people you will need to work on
the project, how long it will take, and what materials you will need (Sekhar, 2020). It's also a
good idea to have some extra money set aside in case anything unexpected happens. For
example, the project might take longer than you thought or you might need more materials. So,
it's important to be prepared for these changes by having extra money in your budget.
2.3.2. Monitoring all expenses using checkpoints

In business, companies want to make sure they don't spend too much money on a project. So,
they keep a close eye on all the expenses and make sure they stay within the budget (Etna, 2013).
They do this by checking in regularly to see how things are going and if any changes need to be
made. This helps them make sure the project is on track and that everyone has what they need to
get the job done. People who are in charge of the project also look at the numbers every week or
month to make sure everything is going well financially. Finance professionals can analyze the
changes needed using these checkpoints and accommodate the budget accordingly. Using this
cost control method allows for changes to be made that do not affect the budget significantly.
2.3.3. Using change control systems

Change control systems are like a way to keep track of any changes that might happen during a
project that could make it more expensive. These changes could happen because of problems or
things that take longer than expected. The goal of change control systems is to watch over any
changes that are made and make sure that the people in charge of the project adjust the budget if
they need to. It's also important to write down these changes and make sure they are important
and helpful for the project.
2.3.4. Having time management

Being good at Cost accounting Budgetary control Outsourcing managing time is really important
when it comes to getting things done on time and not spending too much money. When people
are in charge of a project, they need to be careful with how they use their time so that they don't
go over the deadline. If a project takes too long, it can cost a lot of money because they have to
keep using things like materials and workers. This can make the project not make as much
money as it was supposed to. So, managing time is really important for making sure a project
stays on track and doesn't cost too much (Guilding, 1998).
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2.3.5 Tracking earned value

Using earned value as a way to control costs is something accountants really like because it helps
them keep track of how much money a project is costing. They do this by figuring out how much
of the project is finished and then multiplying that by the budget for the project. By using earned
value, they can predict how much money the project will cost based on things like when they
think it will be finished and how much money has already been spent. This helps the accountants
understand how well the project is doing financially and helps them make smart choices about
how to spend money on the project.
Cost control strategies
2.3.6 Inventory management
In this strategy the inventory levels are effectively managed to avoid overstocking or under
stocking. By monitoring and controlling inventory, organizations can minimize carrying costs,
reduce the risk of obsolete stock, and optimize cash flow.
2.3.7 Supplier management
This focuses on developing strong relationships with suppliers to negotiate favorable pricing,
terms, and conditions. What’s more, effective supplier management also involves selecting
reliable and cost-effective suppliers, maintaining clear communication and fostering
collaborative partnerships to drive cost savings and improve overall supply chain efficiency.
2.3.8 Process optimization Waste reduction
Process optimization aims to streamline operations, eliminate inefficiencies, and reduce costs.
This is done by analyzing and improving workflows, identifying bottlenecks, automating
repetitive tasks, and enhancing productivity through continuous improvement initiatives
(www.indeed.com, 2020).
2.3.9 Waste reduction

The waste reduction strategy aims to minimize waste generation and maximize resource
utilization. This is achieved by implementing recycling programs, optimizing production
processes to minimize scrap or rework, and promoting sustainable practices.
2.3.10 pricing strategies
Pricing strategies involve setting competitive prices that balance customer value and
profitability. This may include strategies such as value-based pricing, cost-plus pricing, or
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dynamic pricing. By analyzing market dynamics, customer demand, and cost structures,
organizations can optimize pricing to maximize revenue and achieve profitability.
2.4Cost control and manufacturing stages

Making things involves many steps, and each step is a chance to save money. The process of
turning stuff like wheat into flour and then into the final product has different parts. It's important
to save money at each part so that resources are used well and the company makes a profit. We
will now look at how to save money during each part. Usually, companies can save money at
every step of making things to spend less and make more money. By making things faster, using
less stuff, and using better technology, companies can do well and stay competitive.
2.4.1 Raw Material Procurement

In the first stage, raw materials are acquired and transported to the manufacturing facility. Cost
control measures can be incorporated at this stage by negotiating favorable prices with suppliers,
optimizing transportation routes to minimize costs, and implementing inventory management
systems to ensure that raw materials are only ordered when needed and in the appropriate
quantities (oboloo.com, 2020). And also from the other end the concept can be seen from the
opposite end of the above stated method such as bulk purchasing, vendor evaluation, and long-
term contracts to optimize material costs. Additionally, implementing inventory management
techniques helps avoid excess inventory and minimize carrying costs.
2.4.2 Production Planning and Design

During the second stage, the materials that we start with go through different processes to
become something we can work with. It's really important to think about how much money
everything will cost during this stage. We can try to save money by using as much of the
materials as possible and not wasting any. We can also try to make our work faster and easier by
using machines and technology. This can help us make things better and save money too. We
need to be smart about how we make things and use our resources so that we don't spend too
much money and make the best products we can (investopedia.com, 2020).
2.4.3 Inventory and Material Handling

Proper inventory management is essential for cost control in manufacturing organizations. By
implementing just-in-time (JIT) or lean inventory practices, organizations can reduce inventory
holding costs while maintaining sufficient materials for production. Streamlining material
handling processes, ensuring proper storage, and minimizing material losses are also crucial
considerations for effective cost control.
2.4.4 Production Process

Implementing cost control measures within the production process involves optimizing labor
utilization, minimizing machine downtimes, and reducing energy consumption. Efficient
workforce management practices, regular equipment maintenance, and implementing energy-
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saving initiatives contribute to cost control during production. Additionally, embracing

automation and technology advancements can enhance process efficiency and reduce labor costs.
2.4.5 Quality Control

While maintaining product quality is paramount, cost control measures can be integrated into
quality control processes. Effective quality control practices ensure that defective products are
identified early, reducing rework costs and minimizing material wastage. Implementing
statistical process control techniques and continuous improvement initiatives can enhance
product quality while controlling costs (www.indeed.com, 2022).
2.4.6 Finished Goods Storage and Distribution

During the final stage, things that are still being worked on become finished and ready to buy.
To keep costs low, different things can be done. This includes making sure the quality is good to
avoid mistakes and having to redo things, finding ways to package and ship things cheaper, and
picking prices that make the most money while still being competitive. It's also important to
store and deliver the finished things in a smart way. This means managing the warehouse well,
finding the best routes for transportation, and making sure everything in the supply chain is
managed well. All of these things help keep costs down.
2.5Classification of cost
The word "cost" means the things, like money, time, or work, which you need to make or get
something. This is really important in business because it affects how much money a company
can make and how long it can stay in business. There are different kinds of costs, like ones that
stay the same no matter how much you make, and ones that change depending on how much you
make. There are also costs that are directly related to a certain thing you make, and costs that are
more general and not directly related to one thing (Horngren, 2006).
Cost classification is when we put costs into groups based on things they have in common. We
do this to understand and analyze the different types of costs a business has. We can group costs
together based on things like why they happen, when they happen, or how they relate to how
much the business makes. Doing this helps businesses manage their money better and make
smart choices about where to spend it.
2.5.1Direct and indirect cost

Direct costs are costs that can be easily connected to one specific thing, like a job or a part of a
company. For example, the cost of the materials used to make something or the money paid to
workers who operate machines. Indirect costs are more general and are used for the benefit of
many different things in a company (investopedia.com, 2020). These costs aren't as easy to
connect to one specific thing. For example, the cost of keeping machines in good condition,
paying for insurance, electricity, rent, salaries for managers, and buying materials for the whole
company.
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2.5.2 Fixed and variables cost

Variable costs are expenses that change depending on how much stuff is being made. So, when
more stuff is made, the costs go up, and when less stuff is made, the costs go down. But, the cost
for each piece of stuff stays the same no matter how much is made. Fixed costs, on the other
hand, are expenses that stay the same no matter how much stuff is being made. Things like rent
for buildings and salaries for managers don't change when the amount of stuff is made changes.
These costs are called fixed costs because they stay the same for a certain amount of stuff being
made and for a certain amount of time (Horngren's, 2018).
2.5.3 Semi- variable or semi fixed costs

Semi-variable or semi-fixed costs are expenses that have two parts: one part that stays the same
no matter what and another part that changes based on how much you use or do something
(www.nottingham.ac.uk, 2018). They are called mixed costs because they have both fixed and
variable parts. Examples of semi-variable costs are utility bills like electricity and water, where
part of the cost stays the same but another part changes based on how much you use. Another
example is a salesperson's salary, which has a fixed base pay but also includes extra money
based on how much they sell. It's important for businesses to understand semi-variable costs so
they can plan and budget correctly, and make good decisions about how much to charge for their
products and how much to make.
2.5.4 Controllable and non controllable costs.

Controllable costs are the ones that a person in charge can manage or control. For example, if
they buy a lot of raw materials at once, they can save money. Non-controllable costs are the ones
that the person in charge can't really do anything about. These costs are affected by things like
how the market is doing, how the economy is doing, and government rules. It's important to
know the difference between controllable and non-controllable costs so that the person in charge
can make good decisions about managing costs in their organization (wallstreetmojo, 2021).
2.5.5 Relevant cost and irrelevant costs

Relevant costs are costs that will change depending on the choice we make. So, when we make a
decision, we need to think about the costs that will be different for each option. On the other
hand, irrelevant costs are ones that will stay the same no matter what choice we make. An
example of this is when we decide whether to take our own car or the bus. The cost of car
insurance is relevant because it will be different depending on which option we choose, but
things like the cost of gas or bus fare are irrelevant because they will stay the same either way.
2.5.6 Relationship of the costs to the products

Costs can be classified based on their relationship to the products being produced. This classification is
important for businesses to understand as it helps them determine the profitability of their products. There
are two main types of costs: direct costs and indirect costs. Direct costs are expenses that can be directly
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attributed to the production of a specific product, such as the cost of raw materials or labor. Indirect costs,
on the other hand, are expenses that cannot be directly attributed to a specific product, such as rent or
utilities. By understanding the relationship between costs and products, businesses can make informed
decisions about pricing, production, and profitability. The cost elements of a product (product cost) are;
2.5.6.1 Materials costs

The cost of principal substances or materials used in production is a crucial aspect of any manufacturing
process. This cost includes both direct and indirect materials that are traced into finished goods by the
addition of direct labor and factory overhead. Direct materials cost refers to those materials that can be
easily identified with the production of finished goods and can be easily traced to the product. For
instance, in the shoe industry, the cost of purchasing leather is a direct material cost for the leather shoe
industry. On the other hand, indirect materials cost refers to all materials involved in the production
process of a product that are not direct materials (tipalti.com, 2018). Examples of indirect materials cost
include nails, lubricating oils, cleaning materials, and supplies such as paper, pens, and pencils.
Understanding the cost of principal substances used in production is essential for effective cost
management and profitability in any manufacturing process.
2.5.6.2 Labor cost

The cost of producing a product involves both physical and mental effort, which can be categorized into
direct and indirect labor costs (Horngren's, 2018). Direct labor cost includes all labor that is directly
involved in the production process and can be easily traced to the product. This represents a major labor
cost in producing the product and includes wages for machine operators, assemblers, painters, and other
similar roles. On the other hand, indirect labor cost includes all labor that is involved outside of the direct
labor process and is included as part of factory overhead. This includes salaries for supervisors and
cleaners, as well as the cost of labor for maintenance, inspection, engineering design, supervision,
materials handling, and machine handling. Understanding these labor costs is essential for accurately
calculating the total cost of producing a product.
2.5.6.3 Factory Overhead (Manufacturing overhead or Factory Burden costs):

Factory Overhead (FOH), also known as Manufacturing Overhead or Factory Burden costs, encompasses
a range of indirect manufacturing expenses that cannot be directly attributed to specific products. This
includes indirect labor costs such as salaries and wages for supervisors, maintenance workers, and other
support staff who are not directly involved in the production process. Indirect material costs such as
lubricants, cleaning supplies, and other consumables used in the manufacturing process are also included
in FOH. Additionally, all other indirect manufacturing costs such as rent, utilities, and depreciation of
equipment are part of FOH. While these costs are essential for running a manufacturing facility, they
cannot be directly identified with specific products and are therefore allocated across all products based
on predetermined cost drivers (Horngren's, 2018).
2.6 Empirical literature review

This literature review covers various research studies on cost control in different fields. The
collection of papers provides valuable insights into the assessment of cost control systems.
Including papers discussing the evaluation of a control system for cost management, highlights
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various methods such as cost avoidance and cost control. Another emphasizes the importance of
considering cost control within the enterprise value chain to enhance competitiveness. Also some
papers stresses the need for establishing corresponding systems, including organization network,
target, feedback, and method systems, to ensure efficient cost control practices. Other papers
suggest that integrating three subsystems based on job management can improve traditional cost
control systems and enhance control methods. Overall, the papers underscore the significance of
evaluating and implementing effective cost control systems within organizations.
The paper released in 2001 by Das in reference to the statistical maintenance cost control system
provides valuable insights into the benefits of using electronic data processing to report
maintenance costs for multiproduct plants. The system offers a direct method for reporting
maintenance costs in a format that is easily interpretable by plant management and control within
the maintenance department. This allows for greater transparency and accountability in the
maintenance process, as supervisors can clearly see how their maintenance dollars are being
spent on labor and materials.
Overall, the statistical maintenance cost control system offers a powerful tool for improving
maintenance processes in multiproduct plants. By providing accurate and easily interpretable
data, the system can help plant management and maintenance supervisors make informed
decisions about how to allocate resources and improve efficiency. As such, it is a valuable
contribution to the field of maintenance management and an important resource for anyone
involved in the maintenance of multiproduct plants.
According to a paper published in 2001 by Charoenngam, in order to fully comprehend cost

control systems in practice, it is necessary to evaluate both the effectiveness and shortcomings of
traditional systems in comparison to more effective ones. The study found that two key factors
that differentiate effective cost control systems from traditional ones are the advancement of the
cost control framework and the systematic participation of site personnel in cost control. These
findings suggest that in order to improve cost control practices, it is important to implement more
advanced frameworks and involve site personnel in the process.
According to Lou et al. (2010) analyzes the factors affecting cost control in railway construction
projects. The authors conclude that effective cost control is not only from the micro-level in the
whole process of railway construction projects but also from the macro-level (institution) and
meso-level (governance). They establish a model of cost control from macro-meso-micro levels
of railway construction projects.
According to a paper published in 2013 by Culley discusses the importance of control systems in
various metrics and the constraints faced by them due to the operating environment and system
failure consequences. The authors suggest that reductions in size, weight, and cost of the control
system are possible. NASA is conducting research to explore these benefits, with emphasis on
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high-temperature electronics and an open-systems approach to standardized communications

interfaces.
According to a paper published in 2013 by Wang, aims to improve the logistics operation of food
processing enterprises and control the logistics cost. The authors analyze the logistics operation
process and characteristics of enterprises, logistics cost classification, and composition of food
processing enterprises, and put forward the basic process of applying TD-ABC (Time-Driven
Activity-Based Costing) to control the logistics cost. They construct the logistics cost accounting
model of food processing enterprises based on TD-ABC and put forward relevant logistics cost
control methods, including the design of a logistics cost control system, determination of
logistics cost control points, and specific implementation steps. The authors compare the cost
accounting results of TD-ABC and ABC and show that the TD-ABC method can accurately
grasp the logistics cost composition, identify inefficient logistics operations and non-value-added
operations, and analyze the efficiency of various logistics departments. They verify the
feasibility and effectiveness of the logistics cost accounting model and control method system
and provide some advice for logistics cost control and logistics process transformation of food
processing enterprises.
In paper Intrusion response cost assessment methodology presents a structured methodology for
evaluating cost of responses based on three factors: the response operational cost associated with
the daily maintenance of the response, the response goodness that measures the applicability of
the selected response for a detected intrusion and the response impact on the system that refers to
the possible response effect on the system functionality. The proposed approach provides a
consistent basis for response evaluation across different systems while incorporating security
policy and properties of the specific system environment
Overall, these studies provide valuable insights into cost control in different fields and suggest
various methods and models to improve cost control.
2.7 Gap in previous studies

It's really important for companies and organizations to know how well they are spending their
money. They use cost control systems to help them keep track of their expenses and make sure
everything is going well.
There is no particularly notable defect or gap that will be seen when we are looking at the studies
that are done on this topic but the reality-shattering news will come when the comparison
between the studies and attention given to the topic in other 1 st world courtiers. By just seeing the
studies from other countries we will experience the unreal phenomena of this study will be one
of the crowd fillers and just will be another piece of paper that’s done but, that is not quite the
thing there are studies of course but they are quite in the finger countable zone. The other gap
that can be pointed out is that the economy that is just surviving as our working capital loans are
so difficult to obtain which will play a crucial role in cutting costs by taking the opportunity of
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buying in bulk for less expense, and this is quite the thing that needs to be considered when we
are talking about the practice of identifying and reducing business expenses to increase profit
One of the main gaps in the literature on cost control systems is the lack of research on the
effectiveness of different types of cost control systems. While there are many different types of
cost control systems available, there is little research on which systems are most effective in
different types of organizations. This is an important area of study because it can help businesses
and organizations choose the most effective cost control system for their needs.
Another gap in the literature on cost control systems is the lack of research on the impact of cost
control systems on employee morale and job satisfaction. While cost control systems are
designed to help businesses save money, they can also have a negative impact on employees if
they are implemented in a way that is perceived as unfair or overly restrictive. Understanding the
impact of cost control systems on employee morale and job satisfaction is important for
businesses that want to maintain a positive work environment.
There is still a lot we don't know about how technology affects the way businesses keep track of
their money. Technology is being used more and more in business, so it's important to figure out
how it can help make money management better. For example, using computer systems to keep
track of expenses and budgets can save businesses time and money. Knowing how technology
affects money management can help businesses decide if they should use new technology or not.
In conclusion, it is really important for businesses and organizations to study how they can
control their costs. Some people have done research on this, but there is still a lot that we don't
know. In the future, researchers should look at different ways to control costs, how it affects how
happy and satisfied employees are, and how new technology can help with cost control. By
figuring this entire out, businesses and organizations can make better choices about how to spend
their money and be more successful.
CHAPTER THREE
3. RESEARCH METHODOLOGY
3.1. Research Design

The primary goal of the proposed research was to conduct a thorough examination of Free flour
factories cost control systems from multiple perspectives. To accomplish this, a combination of
quantitative and qualitative research design methods was utilized through using a descriptive
approach. The focus of the study was not only on analyzing the financial performance aspect of
the cost control system, but also on understanding the company's own perception of its cost
control practices. Additionally, the research would gather feedback and opinions from employees
to gain a more comprehensive understanding of the cost control system. By employing this
mixed-methods approach, the research aimed to provide a more comprehensive and holistic view
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of the cost control system and its impact on both the company's financial performance and the
satisfaction of its employees.
3.2. Research approach

The research approach for the proposed study on the assessment of cost control at Free Flour
Factory was designed to be comprehensive and multifaceted, involving a mixed-methods
approach that integrated both quantitative and qualitative data collection methods. The primary
objective was to conduct a thorough examination of the company's cost control system from
diverse perspectives. Through the utilization of quantitative metrics such as financial
performance indicators as well as qualitative insights derived from the company's own
perception of its cost control practices, the study aimed to offer a holistic view. Moreover, the
research actively engaged employees to gather their feedback and opinions, aiming to acquire a
nuanced understanding of the practical implications and human dimensions of the cost control
system within the organizational context.
3.3. Population
The research's population for the study of the assessment of cost control at the Free Flour
Factory encompasses various interrelated groups directly associated with the organization's cost
control system. Firstly, the target population of this study is the staffs of the finance department,
general manager, and board of directors. Key population’s subset involves the financial and
managerial personnel responsible for the design, execution, and oversight of the cost control
measures within the company. These individuals, ranging from accountants to management and
leaders, constitute a vital segment whose insights and perspectives are critical for
comprehensively analyzing the internal mechanics and strategic underpinnings of the cost
control system. Additionally, the larger body of employees forms an essential part of the research
population. Given the proposed data collection approach that emphasizes gathering feedback and
opinions from employees, their inclusion in the study's population is pivotal for fostering a
thorough understanding of the systemic impact and subjective experiences linked to the cost
control practices.
3.4. Sampling design

The sampling design for the study on the cost control system of the company was multifaceted
and meticulously structured to ensure a comprehensive understanding of the organization's cost
management dynamics. The targeted population for this research mainly comprised the
company's employees directly involved in the cost control system. A purposive non-random
sampling technique was adopted to ensure that a representative cross-section of individuals from
diverse departments and positions was included. This approach aimed to capture a holistic array
of perspectives and experiences, considering the potential differences in roles and responsibilities
across the company. To address these diverse viewpoints, data was gathered through a blend of
surveys and interviews. Additionally, the investigation of the financial performance perspective
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involved an extensive review of the company's financial statements and reports from the most
recent 5-year period starting from 2011-2015E.
3.5. Sample size

The sample size was critical for the research's success. As the study sought to analyze the cost
control system through purposive non-random sampling from the company perspective,
employee viewpoints, and recent financial performance, and any other available documents were
considered. Financial statements from the years 2011-2015E.c were to be reviewed. The
management team was to be interviewed to capture the company's perspective as they designed
and maintained the system. In contrast, a group of technically knowledgeable employees,
totaling 25, was to represent the workforce's perspective. They were to serve as the sample size,
ensuring representation, as the target population was under 30. The entire group served as the
sample size, ensuring representation. For the company's perspective, 4 operational managers, 5
middle managers, 3 top-level department managers, the CEO, and 25 line workers out of
approximately 100 were involved. This approach aimed to identify key subgroups, ensuring the
sample accurately reflected the population for meaningful and representative conclusions.
3.6. Data Type data source

In the study of Free Flour Factory's cost control system assessment, a mixed data collection
approach incorporating both primary and secondary data sources was employed to ensure a
comprehensive evaluation. The combination of primary and secondary data allowed for a
multifaceted understanding of the cost control system, presenting a more complete picture of
both quantitative and qualitative aspects. The financial statements of the firm from recent years
starting from 2011-2015 E.c served as a crucial secondary data source, offering quantitative
insights into the firm's financial performance. Conversely, the firm's own belief in its cost control
system, collected through internal management interviews and internal documents, represented a
primary data source. Furthermore, the viewpoints and feedback from employees regarding the
cost control system represented another primary data source, with the study collecting employee
perspectives through surveys of significant employees and interviews. This mixed approach
enabled the research to triangulate diverse perspectives, fostering a more robust and holistic
comprehension of the Free Flour Factory's cost control system and its organizational
implications.
3.4 Method of data collection

Firstly, questionnaires were to be distributed among company managers to obtain a broad
overview of the financial performance and their perspective on the current cost control system.
These questionnaires could include likert scale questions to quantify opinions and perceptions.
Secondly, interviews were to be conducted with employees at various levels within the
organization to gain insights into their firsthand experiences with the cost control system. The
semi-structured nature of the interviews allowed for in-depth exploration and understanding of
their viewpoints. By employing both questionnaires and interviews, the research aimed to
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capture quantitative data for statistical analysis and qualitative data for a richer understanding of
the cost control system. This multi-method approach ensured a holistic assessment and provided
a more complete picture of the system's effectiveness.
3.5 Methods of data analysis and interpretation

The methods of data analysis and interpretation were based on a mixed-methods approach. Given
the research objectives and research design, a suitable method of data analysis and presentation
for the study involved a multifaceted approach that integrated both quantitative and qualitative
analytical techniques. Data was analyzed from financial reports to assess the current cost control
practices, employing quantitative techniques such as ratio analysis, trend analysis, and variance
analysis to understand the effectiveness of cost control strategies over time. Thematic analysis of
qualitative data gathered from employee feedback was used to identify major constraints
affecting the cost control system. Opinion analysis and thematic coding were implemented to
measure employee satisfaction levels and distinguish their perceptions regarding the existing
constraints. Statistical correlation analysis was conducted to quantify the relationship between
the level of cost control implementation and financial performance metrics. Techniques such as
Pearson's correlation coefficient were used to measure the degree of association. A combination
of visual aids and narrative explanations was utilized to present the findings, using graphs,
charts, and tables to illustrate quantitative results.
3.6 Ethical Considerations

Research ethics are specifically interested in the analysis of ethical issues that are raised when
people are involved as participants in research study. Research ethics have three main objectives:
to protect human participants, ensure that research is conducted in a way that serves interest of
individuals, groups and the society as a whole, and examine specific research activities and
projects for their ethical soundness. It tries to look at issues such as the management of risk,
protection of confidentiality and the process of informed consent (Walton, 2013). The researcher
confidentially maintained sensitive internal reports of the company and carefully reported
responses from selected respondents at management level. The researcher was free from any
personal assessments and he remained honest to responses of the respondents.
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CHAPTER FOUR
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RicardoVargas. (2014). Analytical Hierarchy Process, Earned Value and Other Project Management
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Natnael Asfaw Research

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A senior research paper on assessment of cost control system

(A case study of Free Flour Factory Dire Dawa city)

A senior research paper submitted to the department of accounting

Prepared by:-……………………………………………………Natnael Asfaw

Name of Advisor: Ashu.G (MSC)

College of Business and Economics

Department of Accounting and Finance

Dire Dawa, Ethiopia

A senior research paper on Assessment of cost control system

Department of Accounting &

Department of Accounting &

2.3.6 Inventory management.............................................................................................................13

Department of Accounting &

4. Time and Budget Plan.........................................................................................................................24

Department of Accounting &

Table 4.1 Time Plan………………………………………………………….………….24

Table 4.3 Budget and Cost plan………………………………………….………….25

Department of Accounting &

Department of Accounting &

Department of Accounting &

1.1Back ground of the study

Department of Accounting &

Department of Accounting &

1.2 Statement of the problem

Department of Accounting &

According to a paper published in 2001 by Charoenngam, in order to fully comprehend cost

1.3 Research question

Department of Accounting &

1.4 Objective of the study

1.4.2 Specific objectives

1.5 Significance of the study

Department of Accounting &

1.6 Scope of the study

1.7 Organization of the paper

Department of Accounting &

Department of Accounting &

2.1Meaning of cost and cost control

In today's dynamic business environment, organizations across various industries strive to

Department of Accounting &

Department of Accounting &

2.2Cost control techniques

2.2.1. Cost reduction

Department of Accounting &

2.2.2. Cost accounting

2.2.3. Budget and Budgetary control

Department of Accounting &

2.2.4. Earned value management

2.3. Cost control methods and strategies

Department of Accounting &

2.3.1. Planning the budget properly

2.3.2. Monitoring all expenses using checkpoints

2.3.3. Using change control systems

2.3.4. Having time management

Department of Accounting &

2.3.5 Tracking earned value

Cost control strategies

2.3.6 Inventory management

2.3.7 Supplier management

2.3.8 Process optimization Waste reduction

2.3.9 Waste reduction

2.3.10 pricing strategies

Department of Accounting &

2.4Cost control and manufacturing stages

2.4.1 Raw Material Procurement