IMPACT OF INVENTORY VALUATION METHOD ON NET PROFIT OF MANUFACTURING COMPANIES (A STUDY OF CHAMPION BREWERIES PLC, UYO)

IMPACT OF INVENTORY VALUATION METHOD ON NET PROFIT OF MANUFACTURING COMPANIES (A STUDY OF CHAMPION BREWERIES PLC, UYO)

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ABSTRACT

This study examined the impact of inventory valuation method on the net profit of manufacturing companies, taking Champion breweries Plc, Uyo as the case study. The main objective of the study was to ascertain the impact of inventory valuation method on Champion Breweries Net Profit. The research design used was survey research design. Primary source of data was from the self-formulation questionnaires and personal interview of the respondents by the researcher while the secondary source of data was from textbooks and journals that deal with inventory valuation methods and internet. Findings revealed that Champion breweries Plc have a well defined inventory valuation system. Finding further noted that Champion Breweries Plc. Uyo uses a weighted Average Method of inventory valuation methods adopted has on the net profit. The study recommended that the company should adopt both the periodic inventory system and perpetual inventory system, so that at each state in time, the company can ascertain the inventory outstanding instead of waiting until the end of the year. The weighted average method of inventory valuation adopted by the company often makes the company have a favourable net profit. The researcher adopted descriptive methodology in reporting the outcome of the research.


 

TABLE OF CONTENTS

                                                                                                          Pages

Title Page    -        -        -        -        -        -        -        -        -        i

Declaration -        -        -        -        -        -        -        -        -        ii

Certification         -        -        -        -        -        -        -        -        -        iii

Dedication  -        -        -        -        -        -        -        -        -        iv

Acknowledgements        -        -        -        -        -        -        -        v

Abstract      -        -        -        -        -        -        -        -        -        vi

Table of Contents -        -        -        -        -        -        -        -        vii

List of Tables       -        -        -        -        -        -        -        -        xi

CHAPTER ONE

Introduction  

1.0            Background of the Study        -        -        -        -        -        -        1

1.1            Statement of the Problem        -        -        -        -        -        -        3

1.2            Objective of the Study   -        -        -        -        -        -        4

1.3            Research Questions       -        -        -        -        -        -        4

1.4            Significance of the Study         -        -        -        -        -        -        5

1.5            Scope of the Study        -        -        -        -        -        -        -        6

1.6            Limitation of the Study  -        -        -        -        -        -        6

1.7            Organization of the Study       -        -        -        -        -        7

1.8            Definition of Terms       -        -        -        -        -        -        8

CHAPTER TWO

Review of Related Literature

2.0     Conceptual Facts on Inventory Valuation  -        -        -        9

2.1     Overview of Inventory   -        -        -        -        -        -        9       

2.2     Importance of Inventory Valuation System on the Net Profit 10

2.3     Classification of Inventory in a Production Company   -        11

2.4     Inventory Systems         -        -        -        -        -        -        -        12

2.5     Methods of Valuing Inventory as International Financial

Reporting Standard       -        -        -        -        -        -        13

2.6     Valuation of Inventory  -        -        -        -        -        -        16

2.7     Inventory Management and Control -        -        -        -        16

2.8     Effects of Inventory Accounting       -        -        -        -        17

2.9     Basic Issues on Inventory Valuation -        -        -        -        18

2.10   The Inventory Count and Inventory Reconciliation       -        -        19

2.11   The Review of financial Statements  -        -        -        -        19

2.12   Objective of Inventory Control         -        -        -        -        -        20

2.13   Inventory Control Terminology        -        -        -        -        -        20

2.14   Inventory Taking -        -        -        -        -        -        -        21

CHAPTER THREE

Research Methodology

3.1     Design of the Study       -        -        -        -        -        -        22

3.2     Area of the Study -        -        -        -        -        -        -        22

3.3.    Population of the Study -        -        -        -        -        -        22

3.4     Sample and Sampling Technique      -        -        -        -        23

3.5     Source of Data     -        -        -        -        -        -        -        23

3.6     Instrument used for Data Collection -        -        -        -        23

3.7     Validation of the Instrument   -        -        -        -        -        24

3.8     Reliability of the Instrument    -        -        -        -        -        24

3.9     Data Analysis Technique                  -        -        -        -        -        24

 

 

CHAPTER FOUR

Data Presentation, Analysis and Interpretation

4.1     Test of Research Questions     -        -        -        -        -        25

4.1.1  Test of Research Question 1    -        -        -        -        -        25

4.1.2  Test of Research Question 2    -        -        -        -        -        26

4.1.3  Test of Research Question 3    -        -        -        -        -        27

4.1.4  Test of Research Question 4    -        -        -        -        -        28

CHAPTER FIVE

Findings, Conclusion and Recommendations

5.1     Restatement of the Problem      -        -        -        -        -        30

5.2     Discussion of Findings    -        -        -        -        -        -        30

5.3     Implication of the Findings       -        -        -        -        -        31

5.4     Summary of the Procedure used                   -        -        -        -        32

5.5     Conclusion  -        -        -        -        -        -        -        -        32

5.6     Recommendation  -        -        -        -        -        -        -        33

5.7     Suggestion for further studies   -        -        -        -        -        34

References   -        -        -        -        -        -        -        -        35

Appendix     -        -        -        -        -        -        -        -        36

LIST OF TABLES

Pages

Table 4.1:   What are the impacts of inventory valuation methods? -        25

Table 4.2:   What is the basis of using inventory valuation method by

Champion breweries Plc?                 -        -        -        -        -        26

Table 4.3:   What are the benefits derived by the company in adopting the inventory valuation method       -        -        -        -        -        27

Table 4.4:   What method of inventory valuation to preferable in Champion Breweries Plc, Uyo? -        -        -        -        -        -        28              


 

CHAPTER ONE

INTRODUCTION  

1.0     Background of the Study

Inventory or stock is one of the largest and most valuable current assets of any trading or manufacturing entity. They are element of value held for use or sale by an entity.

The complex nature of today’s business world and the transformation of the entire world and into a global village have been of great concern to managers of all form of business organization. Because this, managers are making conscious efforts researching on the most effective an efficient inventory valuation methods that will maximize adequate net profit.

The word inventory, as known by the Americans and stock by British is indispensable in any manufacturing and servicing organization. According to Welsch et al., (1982-222) “inventories are assets consisting of goods owned by the business at a particular time and held for future sales or for utilization in the manufacturing of goods for sales”. The types of inventories available differ depending on the nature of the business undertaken. In the case of manufacturing company; work-in-progress and finished goods inventory are used. While in trading organization finished goods inventories is used. Inventory generally represents an active asset because of their constant usage and replacement Pugh and Seizer (1980: p. 233).

Due to the vital nature of inventory all possible measures are taken to safeguard it. The net profit of any manufacturing company is linked to the inventory management method which can also hinder profitability.  That is over investment and under investment in inventory. Availability of adequate stocking of items for sales, coupled with risk of loss and cost of over stocking, create critical management planning and control problems. Failure to value inventory valuation should be embarked with the objective of maximizing wealth, while can be acquired by ascertaining the optimum level of inventory sufficient for profit maximization. Nevertheless, valuati


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