EVALUATION OF THE APPLICATION OF MANAGEMENT ACCOUNTING TECHNIQUES IN A MANUFACTURING FIRMS (CASE STUDY OF NIGERIAN BREWERIES PLC, ENUGU)
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Evaluation Of The Application Of Management Accounting Techniques In A Manufacturing Firms (case Study Of Nigerian Breweries Plc, Enugu)

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 EVALUATION OF THE APPLICATION OF MANAGEMENT ACCOUNTING TECHNIQUES IN A MANUFACTURING FIRMS (CASE STUDY OF NIGERIAN BREWERIES PLC, ENUGU)

Abstract

 

This research work titled “Evaluation of the application of management accounting techniques in manufacturing firms with particular reference to Nigeria Breweries Plc Enugu. The study tried to ascertain the extent at which Nigerian manufacturing firms apply management accounting techniques in their operations. It also examined the relationship between the application of management accounting techniques and the performance of manufacturing firms in Nigeria. The researcher equally identified the problems associated with the application of management accounting techniques in Nigerian manufacturing firms. Data for the study was sourced from two main sources which include Primary and Secondary sources of data Collection. Primary data: questionnaires and oral interviews were used to collect information from the respondents. Secondary data: Journals and other relevant materials relating to the area of my investigation will be review. Extensive literature review was carried out on the direct literature and indirect literature on books, journals and past works. The research instrument used in this study includes oral interview and questionnaire. The questionnaire is structural as to contain both close and open ended question. Simple tables and percentages were used in treatment of data. The researcher found out that management accounting techniques are necessary tools towards the accomplishment of organization major objective of profit maximization. The study also established that management accounting information system directly affects the effectiveness of management accounting techniques. Based on the findings the researcher recommends that Management should apply this technique that would aid the attainment of organization goals. Techniques employed should be constantly appraised to remove possible areas of weakness.  Feedback of information to those responsible should be done timely for quick and appropriate actions to be taken.  Proper management orientation on the importance of management accounting information should be pursed vigorously. 

TABLE OF CONTENTS

Cover page ………………………………………………… i

Title page         …………………………………………………    ii

Approval ………………………………………………….    iii

Certification ……………………………………………...   iv

Dedication ………………………………………………..   v

Acknowledgement ………………………………………   vi

Abstract   ………………………………………………….   viii

Table of Content …………………………………………   x

CHAPTER ONE: INTRODUCTION;                                                 

1.1   Background of the Study ………………………...1

1.2   Statement of the Problem …………………………6     

1.3   Objectives of the Study ……………………………7     

1.4   Research Questions …………………………………       8

1.5   Research Hypotheses ………………………………9

1.6   Significance of the Study …………………………10

1.7   Scope and Limitations of the Study ……………………11  

1.8   Definitions of Terms ……………………………………...12

References ………………………………………………………….14  

CHAPTER TWO                                                                      

2.0 REVIEW OF RELATED LITERATURE   

2.1   Standard Costing Techniques ………………………….15    

2.2 Variance Analysis (Accounting) ………………………….23

2.3   Absorption and Marginal Costing Techniques ……..33

2.4   Capital Budgeting Techniques ……………………......38    

2.5      Cost – Volume – Profit Analysis ……………………….53

2.6   Summary of Literature Review ………………………..59

References ………………………………………………………..61     

CHAPTER THREE                                                          

RESEARCH DESIGN AND METHODOLOGY  

3.1   Research Design ………………………………………….63    

3.2   Area of Study ……………………………………………..63

3.3   Population of Study ……………………………………..64     

3.4   Sampling Method ……………………………………64  

3.5   Research Instrumentation …………………………66  

3.6   Sources of Data….…………………………………..67       

3.7   Methods of Investigation …………………………. 68           References …………………………………………….71    

 

 

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS OF RESULTS

4.1    Presentation and Analysis of Result…………….72

4.2    Testing of Hypotheses ……………………………..76

4.2.1 Testing of Hypotheses One ……………………….77

4.2.2 Testing of Hypotheses Two ……………………….79    

4.2.3 Testing of Hypotheses Three ……………………..81    

4.2.4 Testing of Hypotheses Four ………………………83                                          

 

CHAPTER FIVE : SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1   Summary of Findings ……………………………. 86

5.2   Conclusion ………………………………………….. 87   

5.3   Recommendations ………………………………… 88

Bibliography ……………………………………………….90    

Appendix 1………………………………………………...92     

Appendix to Questionnaire11 …………………………93    

 

 

CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

According to Eneje (2005) Accounting is the measurement, processing and communication of financial information about economic entities. It was developed by the Italian mathematician Luca Pacioli, in the end of the 15th century. Accounting, which has been called the "language of business", measures the results of an organization's economic activities and conveys this information to a variety of users including investors, creditors, management and regulators. Practitioners of accounting are known as accountants. The terms accounting and financial reporting are often used as synonyms.

Adeniji (2008) opined that Accounting can be divided into several fields including financial accounting, management accounting, auditing, and tax accounting. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to external users of the information, such as investors, regulators and suppliers; and management accounting focuses on the measurement, analysis and reporting of information for internal use by management. The recording of financial transactions contains the summaries of the financials that is presented in financial reports, is known as bookkeeping, of which double-entry bookkeeping is the most common system.

According to Batty (2009) Accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. Financial statements are usually audited by accounting firms, and are prepared in accordance with generally accepted accounting principles (GAAP). GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board (FASB) in the United States] and the Financial Reporting Council in the United Kingdom. As of 2012, "all major economies" have plans to converge towards or adopt the International Financial Reporting Standards (IFRS).

Without the application of management accounting techniques, no business can succeed in its operations and to attain the set objectives. Moreover, the decision making will not be guided as management accounting techniques provide adequate guide to management decision making. The Chartered Institute of Management Accountants (CIMA) defines management accounting as “an integral part of management concerned with identifying, presenting, and interpreting information used for formulating strategy, planning and controlling activities,decision making, optimizing the use of resource disclosure to shareholders and other external entity, disclosure to employees, safeguarding assets.

Adeniji (2008) defines management accounting as “the application of accounting knowledge, techniques and skills to the provision of information designed to assist all levels of management in planning and controlling the activities of a business enterprise”. According to Chambers dictionary definition, “management accounting is designed for or adopted to the informational needs of various levels of management. Nweze (2013) defines management accounting as multi-displinary in nature and concerns itself with advising management on the functional areas of management, namely, planning, organizing, directing and controlling.

Management accounting, therefore, is primarily concerned with data gathering, analyzing, processing, interpreting and communicating the resulting information for use within the organization so that management can plan more effectively, make decisions and control operations.

Why is management accounting concerned with the provision of management information? Management accounting techniques are concerned with those practices of management accountants which management should adopt to facilitate management decision making. According to Lucey (2010) management accounting techniques are methods designed to suit the way goods are processed or manufactured or the way the service are rendered. The techniques to be adopted by an organization depend on the purpose for which the organization is formed. Management accounting techniques are concerned with those techniques as marginal costing, absorption costing, standard costing, actual cost ascertainment, variance accounting, budgetary control, differential costing capital budgeting etc.

In this study, Nigerian Breweries has been chosen as case study. This company was incorporated on 16thNovember, 1916. In 1990, when the Companies and Allied Matters Act came into force, the name of the company was changed to Nigerian Breweries Plc. With the acquisition of a controlling interest (i.e. 54. 10%) in the equity of Nigeria Breweries within the Heineken group, Nigerian Breweries Plc has become a subsidiary of Heineken group. Currently, Nigerian Breweries Plc has five (5) breweries at Lagos, Aba, Kaduna, Ibadan and Enugu.

The principal activity of the company is the brewing and marketing of lager beer, stout and non- alcoholic malt drinks.     Over the years, Nigerian Breweries Plc has made tremendous success in its operations and has remained one of the most viable and profitable breweries in Nigeria making based on the information provided by management accounting and the various practices adopted.

1.2   Statement of the Problem

The application of management accounting techniques is aimed at providing information, which should help management to plan and control the resources of the organization in order to achieve the objectives of the organization.

To attain a remarkable performance and profit ability, organization face the problems of ascertaining which products, labor, territories, sales persons, plant division and company segment are contributing the most to the profitability of the organization and how to balance quantitative variables with qualitative variable in arriving at a definite decision in the evaluation of projects.

1.3 Objectives of the study

The aim of this research work is to evaluate the application of management accounting techniques in manufacturing firms with particular reference to Nigeria Breweries Plc Enugu. The specific objectives of this project work include the following:

1.  To ascertain the extent at which Nigerian manufacturing firms apply management accounting techniques in their operations.

2.  To examine the relationship between the application of management accounting techniques and the performance of manufacturing firms in Nigeria.

3.  To evaluate the relevance of management accounting in the development of Nigerian manufacturing industry.

4.  To identify the problems associated with the application of management accounting techniques in Nigerian manufacturing firms.

 

1.4 Research Questions

In this study, the application of management Accounting Techniques in manufacturing firms (a Case study of Nigerian Breweries Plc, Enugu) the following research questions were highlighted and asked:

 

1.     To what extent do Nigerian manufacturing firms apply management accounting techniques in their operations?

2.     Is there any relationship between the application of management accounting techniques and the performance of manufacturing firms in Nigeria?

3.     What is the relevance of management accounting in the development of Nigerian manufacturing industry?

4.     What are the problems associated with the application of management accounting techniques in Nigerian manufacturing firms?

  1.5 Research Hypotheses

(i)          Ho: Nigerian manufacturing firms have not apply management accounting techniques in their operations.

H1: Nigerian manufacturing firms applies management accounting techniques in their operations.

 

(ii)        Ho: There is no relationship between the application of management accounting techniques and the performance of manufacturing firms in Nigeria.

H1: There is significant relationship between the application of management accounting techniques and the performance of manufacturing firms in Nigeria.

(iii)      Ho: Accounting is not relevant in the development of Nigerian manufacturing industry.

H1: Accounting is very relevant in the development of Nigerian manufacturing industry.

(iv)       Ho: There is no problem associated with the application of accounting techniques in Nigerian manufacturing firms.

H1: There are so many problems associated with the application of accounting techniques in Nigerian manufacturing firms.

 

1.6   Significance of the Study

In this study, the Application of Management Accounting Techniques will help to ensure that every information is properly scrutinized before being employed into decision making.

This study will be of immense benefit to these groups of persons:

i.            The  manager and management of manufacturing firms

ii.          The students in accountancy profession and other applied management professions.

iii.        Researchers on related study.

iv.         Management accountants and financial analysis

v.           The government and

vi.         The general public

 

1.7   Scope and Limitations of the Study

        This study is restricted to the application of management accounting techniques as it is used in a manufacturing firm based in Enugu (Nigerian Breweries Plc). It studies the extent to which management plan and controls the resources of the organization in order to achieve the objectives of the organizations. This became necessary as student’s finances and time are insufficient to carry out a comprehensive research worthy of this topic.

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