Costing techniques and profitability trade off: An investigation on the agricultural firms listed in the Nairobi securities exchange.

Abstract

Costing techniques have great impact on life and global economy especially the profitability levels of Agricultural companies in the Nairobi Securities Exchange (NSE). The profitability levels in the Agricultural firms in Kenya have declined, stagnated or suffered losses in the recent past leading to price fluctuations hence low profitability levels. The drive of this study was to investigate the costing techniques and profitability trade off of agricultural firms listed in the NSE. Specifically the study sought to establish the effect of job costing on determination of the level of profitability in the quoted agricultural firms in NSE. The study was steered by transaction cost theory and applied descriptive research design. The target population of seven (7) listed agricultural firms listed in the NSE, hence adopting the census technique where all the seven respondents were used. Data collection sheet was used to obtain secondary data from audited published financial statements of listed agricultural firms in NSE. The period of the study was five years from 2018 to 2022. The data collected was analyzed using descriptive statistics that were summarized using mean and standard deviation. Diagnostic tests used to test the research hypothesis included tests of normality, autocorrelation, collinearity and linearity tests. Correlation, regression analysis and multiple linear regression models was carried out to show whether and how strongly changes in costing techniques were related to firms’ profitability and to determine the association amongst costing techniques and profitability. The findings were presented in figures and tables and prose form for its discussions. Job costing had a significant effect on the profitability of agricultural firms listed in the NSE when measured alongside other costing methods. Both the coefficient is positive (β1=0.565) and the p-value is lower than 0.05, indicating statistical significance. The recommendation to the industry is to prioritize Job Costing given its significant positive effect on profitability of agricultural firms should consider implementing and expanding its use. Firms using other costing methods should reassess their effectiveness and consider integrating Job Costing elements into their existing systems. For academia, conduct more studies to authenticate these findings across different contexts, firm sizes and geographical locations within the agricultural sector. Emphasize on Job Costing method in accounting and agricultural management curricula while still maintaining a balanced approach to other costing methods. For policy formulators, consider policies that encourage or incentive the adoption of Job Costing method in agricultural companies like, tax benefits or grants for implementation and developing guidelines or standards of costing