MANAGERIAL ACCOUNTING AS AN INSTRUMENT OF PLANNING AND CONTROL IN A MANUFACTURING COMPANY (A CASE STUDY OF FARM ASSOCIATES NIG LTD)
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MANAGERIAL ACCOUNTING
AS AN INSTRUMENT OF PLANNING AND CONTROL IN A MANUFACTURING COMPANY
(A CASE STUDY OF FARM
ASSOCIATES NIG LTD)
ABSTRACT
This study was undertaken to
investigate the application of managerial accounting as a tool for planning and
control in business oriented enterprise, especially a manufacturing
company. The research focused on such accounting information available to
the management of farm associates Nigeria Limited, Enugu for decision on
production, purchasing, pricing and cost reduction. Managerial accounting
techniques employed were budgeting and budgetary control, standard costing and
variance analysis direct c1osting, break even analysis and project cost
analysis.Relevant information was gathered from the management of the company
through questionnaire and oral interviews. The data so collected were
statistically analyzed. Results of the research revealed the following;
managerial accounting helps management of manufacturing companies in planning
and control; management accounting help to check wastage in manufacturing
companies and thirdly, managerial accounting helps manufacturing companies make
desired profit.It was recommended that business oriented enterprise, especially
manufacturing firms should design, install and operate effective and efficient
managerial accounting systems to help them realize their profit motives.
Managerial accounting is therefore considered an instrument for planning and
control in any manufacturing company.
TABLE OF CONTENTS
CHAPTER
ONE
INTRODUCTION
1.1 Background of
Study
1.2 Statement of the problem
1.3 Objective of
study
1.4 Research Questions
1.5 Research Hypothesis
1.6 Scope and delimitation of
Study
1.7 Significance of the
study
1.8 Historical Development of
Farm Association
1.9 Definition of
Terms
Reference
CHAPTER TWO
LITERATURE
REVIEW
2.0 Introduction
2.2 Management Accounting
2.3 Cost Analysis and cost
Ascertainment
2.4 Direct Costing
Analysis
2.5 Cost Behaviour
2.6 Management
Accounting Technique
2.7 Planning and Control as Vital
Functions
2.8 Cost
Systems
2.9 Manufacturing Accounting
2.10 Pricing Policy
Reference
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 Research
Design
3.2 Population of the Study and
Sample Size
3.3 Sources of Data
Collection
3.4 Data Treatment Technique
Reference
CHAPTER
FOUR
Discussion, recommendation and
conclusion
4.1 Presentation and Analysis of
Data
Reference
CHAPTER FIVE
Summary of Findings,
Conclusion and Recommendations
5.1 Summary of Major Findings
5.2 Conclusion
5.3
Recommendation
5.4 Suggestion for Further
Research
Bibliography
Appendix
Questionnaire
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Management Accounting is an integral part
of management concerned with identifying, presenting and interpreting
information used for: formulating strategy, planning and controlling
activities, decision taking, optimizing the use of resources, disclosure to
shareholders and others external to the entity, disclosure to employees and
safeguarding assets. Management accounting therefore is primarily concerned
with data gathering (from internal and external sources) analyzing, processing,
interpreting and communicating the resulting information for use within the
organization, so that management can more effectively plan, make decision and
control operations.
According to Koontze and O’ Donnel (1980), there is no more important area of
human activity than managing; for it is the basic task of all managers at all
levels and in all kind of enterprises, to design and maintain an environment in
which individuals working together in groups can accomplish pre-selected
missions and objectives. In other words, managers are charged with the
responsible of taking actions that will make it possible for individuals to
make their best contributions to group objectives.
Although much emphasis is placed on managers in designing on internal
environment for performance, it can never be overlooked that managers must have
many interactions with the environment of both an enterprise and departments
within it. As for interaction with the external environment, managers cannot
perform their tasks well unless they have an understanding of an are responsive
to the many elements of the economic, technological, social, political and
ethnic environment that affect their areas of operation.
Managing is essential in all enterprise while the term “management is generally
taken to mean person of high level in the organization. All those responsible
for the work of others at all level and in any type of enterprise regard
themselves as managers. The goal of all managers in manufacturing outfit
that is business oriented is basically profit. Profit is a measure of surplus
of business income over cost. Therefore, the task of managers is to establish
the environment for group effort in such a way that individuals will contribute
to group effort and objective with the least amount of such inputs as money
time, effort, discomfort and materials. Effective and
efficient management is often assessed in terms of ability to
attain company goals with least cost.
In
understanding managerial task, planning control are the critical management
functions which are considered essential to attain corporate objectives.
In designing an environment for the effective performance of individuals
working together in groups, the most essential task in to see that purpose and
objectives and method of attaining them are clearly understood. If group effort
is to be effective, people must know what they are expected to
accomplish. This is the function of planning and it is the most basic of
all the managerial functions. It involves selecting from among alternative
future courses of action for the enterprise as a whole and for every department
or section within it. It requires selecting goals and determining ways of
achieving them.
Eze (2001:42) noted that, the basic objective of planning is to provide
guideline for decision making. Immediately a decision need has been identified,
planning provides for a method of scanning decision alternative within the
framework of the enterprise objectives and other constraints. Thus, planning
provides a rational approach to pre-selected objective, it strongly implies
managerial innovation. Since managerial operations organizing, staffing,
directing, leading and controlling are designed to support the accomplishment
of company objective, planning logically precedes the execution of all other
managerial function. Although all the managerial functions intermingles
in practice as a system of action, planning unique in that it establishes
the objective necessary for all group efforts.
The managerial function of controlling is the measurement and correction of the
performance of activities of sub-ordinates in order to make sure that company
objective and plans devised to attain them are being accomplished. In an
undertaking control consist in verifying whether everything occurs in conformity
with plan, adopted the instruction issues and principles established. The
object of control is to point out weakness and errors in order to rectify them
and prevent reoccurrence. Control techniques and system are essentially
the same for cash, office procedures, morale, product quality or anything
else. The basic control process wherever it is found and whatever it
controls involves there steps namely; establishing standard, measuring
performance against these standards and correcting deviations from standard and
plans.
Managerial accounting is concerned with the application of accounting and
statistical techniques to be specified purpose of providing and interpreting
information designed to assist management in its function of promoting maximum
efficiency (Osisoma 1990:185) it focuses on the internal business environment
and provides information for such decision of the company as manufacturing or
buying, replacement pricing and cost reduction decisions. The techniques
applied for the analysis are both statistical and accounting in nature,
budgeting and budgetary control, standard costing, and variance analysis direct
costing and break even analysis and project costing analysis.
From the fore-going one can consider managerial accounting as a tool for
planning and control in profit oriented enterprise, especially a manufacturing
firm.
1.2
STATEMENT OF PROBLEMS
The objectives of managerial
performance in a business enterprise are profit. Profit is a measure of
surplus of business income over costs. A major managerial task is to
achieve minimized cost in terms of such inputs as money, time, effort,
discomfort (job stress and occupation hazard) and materials. Many
enterprises especially manufacturing companies often fail to attain this goals because
of non-recognition.
Therefore, the researcher tries to bring out the two vital management function
planning and controlling which when utilized will go a long way in achieving
company objectives with least cost.
1.3 OBJECTIVE
OF THE STUDY
This research work was carried out to
achieve the following objectives:
1.
To determine the impact of managerial accounting on a manufacturing
organization.
2.
To determine the impact of managerial accounting on a manufacturing company operational
control system, production, sales and marketing.
3.
To determine the role of managerial accounting on costing and pricing polices
of manufacturing company.
4.
To determine the importance of managerial accounting in decision making and
performance appraisal.
1.4 RESEARCH
QUESTIONS
The under listed
questions will be necessary to make this study a success:-
1.
Does your company operate a effective and efficient managerial accounting
system?
2.
Is your company’s managerial accounting system of assistance to your company in
budgeting?
3.
Do you use data or figures from managerial accounting in costing and pricing
decisions?
4.
Do you use information sourced from managerial accounting in production
controls?
5.
Do you use information sourced from managerial accounting when fixing price for
products?
1.5 RESEARCH
HYPOTHESIS
From the research questions seen above,
some hypothesis were formulated and they possess the following”
1.
H0: There
is no relationship between accounting
instrument and
control in manufacturing company.
H1: There is a positive relationship between accounting
instrument and
control in a manufacturing company.
2.
H0: There
is no relationship between effective
accounting plan and
control in a manufacturing company.
H0:
There
is a relationship between effective
accounting plan and
control in a manufacturing company.
1.6
SIGNIFICANCE OF THE STUDY
Many manufacturing companies
(especially the many scale industries) do operate managerial accounting system,
perhaps as a matter of routine. However, these companies do not utilize
financial information generated by the accounting system in their production,
planning and control, costing and pricing policies as well as in managerial
decision making and performance appraisal.
The study has therefore become necessary as its findings will go a long way to
sensitize the manufacturing companies on the need to employ managerial
accounting system in their operational planning and control.
1.7
HISTORICAL DEVELOPMENT OF FARM ASSOCIATED NIGERIA LIMITED ENUGU
Farm Associates Nigeria Limited, Enugu
is an association of farmers which was established immediately after the civil
war (1967-1970). It later became a limited liability company following
its incorporation in the year 1982.
The engage in the sell of veterinary drugs and in the production of live stock
feeds which include poultry feeds, pig feed and fish feed. The raw
material used for the production of these feeds are maize, wheat, soya beans,
salt, groundnut cake, palm kernel cake and additives.
Recently, the association is trying to establish another branch for the
processing of maize.
1.9 DEFINITION
OF TERMS
Some key concepts
have to be defined because they will be used throughout the study and therefore
ought to be understood.
Balance Sheet: According
to Iloh (2004), it is a financial
statement that lists
a firm’s assets and claims (liabilities and owners equity) at a particular
time.
Controlling: These
are those activities of management
which ensure that the
actions of the organization confirm with set plan (Okechukwu, 2005).
Finished Goods: As noted
by okechukwu (2005), they are
the stock under the
custody of the sales/marketing department. They are the raw materials
that have passed through all the stages of production and have passed the final
stage and are ready for resale.
Fund:
According to Adams R.A. (2006:62), fund
is a
separated fiscal and
accounting entity in which resources are held, governed by special regulation,
separated from other funds and established for specific purpose.
Labour:
As notd by Okechukwu(2005), they are the worker / personal employed in a
company. These workers are paid wages and salaries.
Production:
As noted by Brigham (1979), it is all the activities associated wit the
provision of goods and services.
Raw
Materials: According to Okechukwu (2005),they are
those stock items procured and worked upon to convert same into finished goods.
Stock:
According
to Okafor(2000), it means goods purchase for resale / raw material and
components purchase for production of products and services in intermediate
stages of completion normally referred to as work in progress or finished
goods.
Variable:
Orjih (2009:29) noted that it is anything that differs in attribut. It may be
viewed as any characteristics of an object or concept which is capable of
taking different values or taking more than one distinct category.
W.I.P:
As
noted by Okechukwu (2005), they are stock items which have left the raw
materials stage but have not reached the final goods stage in order to become
finished goods.
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