The Effects of Cost on the Profitability of an Organization: A Case of Grand Cereals and Oil Mills Limited, Nigeria

This study investigates the effects of cost on the profitability of Grand Cereals and Oil Mills Limited (GCOML), Nigeria. The study specifically examines the relationship between production cost and profitability, identifies the role of proper costing in organizational growth, evaluates the impact of sales on profit performance, and assesses how value-added tax (VAT) influences net income. A cross-sectional survey design was adopted, and secondary financial data covering 2007–2016 were obtained from GCOML’s headquarters. The data were analyzed using Simple Correlation and Analysis of Variance (ANOVA) with SPSS (version 25). The findings reveal a strong negative correlation between cost of production and profitability, indicating that rising costs significantly reduce profit margins. Sales, however, show a strong positive correlation with profitability, demonstrating that increased revenue enhances profit levels. VAT exhibits a negative correlation with profitability, implying that high tax obligations lower net returns. The ANOVA results further confirm that cost of production, sales, and VAT jointly have a statistically significant effect on profitability (F = 15.62, p < 0.05). The study concludes that effective cost control, improved operational efficiency, and strategic pricing are essential for strengthening profitability in manufacturing firms. It recommends the adoption of cost-minimization techniques, continuous process improvement, enhanced revenue strategies, and tax-planning measures to improve financial performance.