Cost Accounting Practices and Pricing Decisions of Small Manufacturing Firms in Enugu State

Accurate cost accounting is a prerequisite for rational pricing decisions in manufacturing firms, yet many small manufacturers in Nigeria set prices based on intuition or competitor-copying rather than systematic cost analysis, resulting in chronic profitability challenges and vulnerability to market volatility. This study examines the relationship between cost accounting practices and pricing decisions of small manufacturing firms in Enugu State. The study is anchored on the Activity-Based Costing (ABC) Theory, which allocates overhead costs to products based on actual consumption of activities, providing more accurate product cost information than traditional volume-based allocation methods. A descriptive survey research design was adopted. The population comprised 189 small manufacturing firms in food processing, furniture making, and metalwork sectors in Enugu State, registered with the Manufacturers Association of Nigeria (MAN). A sample of 128 respondents was selected using stratified random sampling. Data were collected via structured questionnaires directed at business owners and accounts officers, and analysed with multiple regression and descriptive statistics. Findings reveal that firms applying systematic cost accounting, including material cost tracking, labour cost allocation, and overhead absorption, set more competitive and sustainable prices than firms using intuitive pricing. The results further indicate that firms using ABC principles record higher gross profit margins and fewer loss-making product lines. It is concluded that the adoption of structured cost accounting practices is a direct enabler of rational and profitable pricing in small manufacturing firms. The study recommends that manufacturing SMEs in Enugu engage certified accountants for cost structure reviews and prioritise cost accounting training for owner-managers through institutions such as IMT Enugu.

Keywords: Cost accounting, pricing decisions, small manufacturing firms, Activity-Based Costing, Enugu