Activity-Based Costing for Better Production Management in the Nigerian Pharmaceutical Industry

Activity-based Costing (ABC) is a powerful tool to use by a business organization for ensuring accuracy and effectiveness in its production cost management and avoiding cost distortion, so as to work towards achieving sustainable growth and development in the era of globalization and complex business environment. This paper aims to figure out the impact of the ABC on production management efficiency in the Nigerian pharmaceutical companies. The methodology used is the interview of key personnel of Ugolab productions Nigeria Limited, and review of academic and professional literature on ABC application. Conclusions are drawn from theoretical analysis and discussion of results. This research adds insight into management accounting system of production cost determination for proper pricing, using activity based costing. Based on the analysis conducted on the application of ABC as costing method, it is clear that ABC helps management to make informed costing decisions and better production management. This paper recommends that Pharmaceutical manufacturing companies should provide capacity building training to their staff in relevant departments to ensure that they understand how to use the ABC system and accelerate its use in their company. They should also establish research and development (R & D) department or collaborate with a relevant University or research institute for the conduct of research on new methods or systems of production and provision of high quality products at the most cost effective way to their customers, like the ABC method.