Evaluation of Cost and Return Analysis and Determinants of Profitability of Sawmill Industry in Ogbomoso Area of Oyo State, Nigeria

Abstract

The study examined cost and return analysis and determinants of profitability of saw mill industry in Ogbomoso area of Oyo state, Nigeria.  Multi-stage sampling procedure was employed to select seventy-six (76) saw millers in the study area. Detailed questionnaire was used to obtain relevant information from the respondents. Budgetary analysis was used to calculate the profitability while regression analysis was used to determine factors affecting the profitability of the  sawmill. About thirty-six percent (36%) of the respondents fell within the age range of 51 -60 years, eighty three percent (83%) were males and ninety two percent 92% engaged in saw milling as the only source of livelihood. The result of the budgetary analysis showed that total variable cost was (TVC) ₦1,044,142, Total fixed cost (TFC) was ₦65,774.5 while the total cost (TC) was computed as ₦1,109,917.4 and total revenue (TR) was ₦1,721,573.  The profit realized was ₦611,655.6 and the gross margin was₦ 677430.1 while the BCR was 1.55. The result of the regression analysis showed that number of trained sawyers (P<0.1), source of capital (P<0.1) and quantity of plank sold (P<0.05) and type of conversion machine used (P< 0.05) increased the profitability of sawmill business in the study area. The study recommended that old/obsolete machineries should be replaced and respondents’ proper training is paramount to an efficient saw milling operation.