Effect of Cost Control Systems on Performance of Medium Scale Enterprises in Kericho Town

Abstract

Costing control systems is not only crucial but also specific in any production and services rendered in any business irrespective of the enterprise. This is because it is an important instrument for business operation used by management in undertaking crucial decisions, helps to facilitate and manage information to improve management. It is therefore a significant insight in the determination of earnings, boom, growth, and development of organizations and business enterprises. Despite the role of Costing control systems, it’s effectiveness in MSEs is not clear thus the need to carry out the study. The purpose of the study is to investigate the effect of cost control systems on performance of medium scale enterprises. The understanding of the relationship between the two components of costing control system will enable the medium-scale evaluate their performance and instruct their employees to work according to the plan and provide a basis of control as well as help the government to design the best strategies for the sector. The research design was a cross-sectional study and adopted a survey research design. The target population was the 313 medium scale enterprises within Kericho town. Using Kothari's (2004) formula of the finite population the sample of 173 medium scale enterprises were selected. Questionnaires and data extraction forms was the main research tools of data collection. The key informants included the business’ finance, operation, and accounts manager/director. The questionnaires were tested and retested using Cronbach's Alpha for reliability and experts' opinions was sought to ensure instrument validity. The data obtained were analysed using Ordinary Least Squares Regression Analysis at a 5% significance level. Based on the results from the regression analysis, it was established that the selected costing control systems classified as independent variables accounts to 99.9% of the variance in the business performance. It can be deduced that costing control systems have an impact on medium scale enterprises performance therefore crucial for the implementation of the systems for effective performance. Costing control systems has a positive impact on performance (p = .000, p<0.05), this means that increased use of costing systems will improve performance of medium scale enterprise. Conclusions were made that the costing control system has significant effect on the performance of medium scale enterprise. The study recommended for implementation of these costing control systems for effective performance in the enterprises.