Budgeting As A Tool For Planning And Control In A Manufacturing Industry
(A Case Study Of Nigerian Breweries Plc Enugu)
Budgeting serves as a critical tool for planning and control within a manufacturing industry, providing a structured framework for forecasting and managing financial resources. By establishing detailed budgets for various aspects of operations such as production, raw materials procurement, labor costs, and overhead expenses, companies can effectively allocate resources to maximize efficiency and profitability. Moreover, budgeting enables comparison of actual performance against planned targets, facilitating proactive identification of variances and the implementation of corrective measures to ensure alignment with organizational goals. Through continuous monitoring and adjustment of budgets, manufacturing firms can optimize resource utilization, enhance operational effectiveness, and maintain financial stability in dynamic market environments.
This research work was focused on investigation on the use of budgeting as a tool for planning and control in topical manufacturing industry like Nigerian breweries plc, Enugu.
The objective of the study is to show the important of budgeting as a tool for planning and control in operation of a manufacture industry which has profit maximization as its principal objective. The research also aims at identifying the procedures adopted in the formulation of annual budgets of Nigerian Breweries plc.
Based on this, the following hypothesis was formulated for the study. The hypothesis include:
(1) Managers use budgeting as a tool for planning and control in attaining the goals of the business.
(2) Decision-making is performed in a manufacturing industry using budgeting.
(3) Utilization of resource is achieved with the use of budgeting and budgetary control
Following the investigation and analysasion of the data, the following finding were made:
(1) The organization uses budgeting in achieving their goals and objectives.
(2) The main objective of the organization is maximization of profit.
(3) Efficiency and effectiveness of the organizations operation is enhanced through the use of budgeting etc.
From the finding, the conclusion were arrived that budgeting is a very essential and indispensable tool for planning and control. It helps management to be well structure in sustaining the growth and expansion of the organization
Title page
Approval page
Dedication
Acknowledgement
Abstract
CHAPTER ONE
INTRODUCTION
1.1 Statement of the problem
1.2 Purpose Of The Study
1.3 Research question
1.4 Statement of hypothesis
1.5 Scope and limitation of the study
1.6 Significance of the study
1.7 Definition
CHAPTER TWO:
REVIEW OF RELATED LITERATURE
2.1 Definition of budget
2.2 Features and functions of budget
2.3 Preparation of budget
2.4 Type and methods of budget
2.5 problems associated with budget
2.6 planning function in an organization
2.7controlling function in an organization
2.8 Budgetary control and analysis of variance
CHAPTER THREE:
RESEARCH METHODOLOGY
3.1 research design
3.2 Source of data
3.3 sampling and sample size
3.4 method of data analysis
3.5 problem of data collection.
CHAPTER FOUR:
PRESENTATION, ANALYSIS AND INTER-PRESENTATION OF DATA
4.1 Analysis of data
4.2 Hypothesis testing
CHAPTER FIVE:
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION.
5.1 Summary of findings
5.2 Conclusion
5.3 Recommendation
BIBLIOGRAPHY:
APPENDIX: QUESTIONNAIRE
INTRODUCTION
Business organizations need planning to achieve their aims and objective. It thorough planning in an organization cannot be done without involving the act of budgeting. The management has the purpose of providing a feed – foreword process.
The concept of feed-forward =process in to provide each manager with guideline for making operation decision on a day –to- day basic. Budgeting deals with plans and monitoring activities to ascertain whether they conform to the plans. This is the control and coordination aspect of budgeting.
Manufacturing industries can only achieve profit maximization by proper planned use of available resource. This is sustained when different activities are efficiently coordinated, and decisions taken in the organization are result oriented. Business organization requires the use of some techniques in the formula and adoption of planned and defined system and tools with a view to achiever set goals. Such tools and systems include budgetary variance analysis and budgetary control. The process of setting goals to be achieve in the future time and determining how these goals are to be reached is described as PLANING, while the process of translating this planning into financial target can be described as BUDGETING.
Reg, H. Garrison, in his opinion, defined budget, thus, a budget is a detailed plan showing how resources will be require and used over some specify time interval. It repented a plan for the future expressed in a formal qualitative terms. The act of preperating a budget is called budgeting. The use of budget to control a firms activities is known as budgeting control ‘’.
This project is organized in five chapters, which aimed at finding out the budget process used achieving the goals of a typical. Manufacturing, industry with profit maximization as its main objective with center focuses in Nigerian breweries plc Enugu.
Chapter one is an introduction to the study concerning such issues as:
(1) Statement of problem
(2) Purpose of the study
(3) Statement of hypothesis
(4) Research question
(5) Scope and limitation of the study
(6) Significant of the study
(7) Definition of terms
Chapter two present the literature review, which such issues as:
(1) Definition of budget
(2) Feature and function of budget
(3) Preparation of budget
(4) Types and methods of budget
(5) Problems associated with budget
(6) Planning function in an organization
(7) Controlled function in an origination
(8) Budget control and analysis of variance.
Chapter three presents the research design methodology.
The source of data collected for analysis, and treatment of some of the problems encountered during data collected were examined and analysis in detail to enable us draw conclusion there by making recommendation.
Chapter five contains the summary of the research, recommendation and conclusion.
STATEMENT OF THE PROBLEM
The management has his primary duty of achieving the objective of profit maximization of the company through budgeting .due to the state of our economy, and government policies, this goal is much hindered during the period of economic depression which features low capacity utilization, high interest rate shortage of foreign exchange to buy the needed, raw material. Management is filed with the problem of how to make use of available scarce resources your order to achieve the objective of profile maximization. This research work is intended to help in determingand highlighting the problems that militate against the application and utilization of budgeting as a tool for planning and control in a manufacturing industry The research work will provide solution of the following problems.
(1) Inability of the manufacting company objectives (2) Insufficient appraisal of the company performance base on budgeting.
(3) Inability of officers in the cost centers to conform to guild line and attain the standard set in the organization. This is applicable to all workers
(4) Inadequate monitory of compliance with and deviation from department and entire budgets.
1.2 PURPOSE OF THE STUDY
The purpose of this study includes the following: –
(1) To show the importance of in getting as a tool for planning and controlling in the operation s of a manufacturing industry which has the maximization of profit ads its principal objectives
(2) To identify the procedures adopted in the formulation and implementation of animal budget in Nigerian Breweries plc Enugu
(3) To determine whether there is a correlation between the type of budget implemented and their actually performance.
(4) The study will determine whether or not budgeting control as a management tool contributes to the improvement of managerial efficiency and high productivity.
1.3 Research Question
(1) How does managers use budgeting in planning and control in author the goals of a business?
(2) How does decision making performed in a manufacturing industry using budgeting as a tool for planning and control?
(3) How has utilization of resources achieved with the use of budgeting and budgetary control?
1.4 STATEMENT OF HYPOTHESIS
The following are the basic for research in this study:
HI: Managers are using budgeting in planning and controlling the the business resources
HO: mangers are not using budging in planning and controlling the business resource.
HI: budgeting is a tool for effective decision making in manufacturing industry.
HI: utilizations of resource is achieved with the use of budgeting and budgetary control
HO: utilization of resource is not achieved e with the use of budgeting and budgetary control.
1.5 SCOPES AND LIMITATION OF THE STUDY
The study of budgeting as a tool for planning and control in a manufacturing industry has its scope limited to Nigerian Breweries (NBL) PLC Enugu due to various constraints.
Among the major constraints is the fear of job security by some staff of the company might be unsafe if they grant interviews.
Again funds available to the researcher and cost of printing the questionnaire to and from the respondents.
Moreover there was retaining of time so as to come other course within the limited time.
1.6 SIGNIFICANCE OF THE STUDY
In the business world the main objective is to maximize profit by providing goods and services of fair, comparative, and affordable prices no management can ignore profit maximization unless it will be stifled out of business.
Hence, this study is significant with the following reason:
(1) The study will determine whether budgeting as tool for planning and control played any significant role toward ensuring portability and efficient rendering of goods and services.
(2) Ascertain the role-play by the management in budgeting and whether they ensure to the budget.
(3) Ascertain the role of budget as a tool for effective and efficient utilization of scare resources.
(4) The study will help future researcher on budgeting and budgetary control with emphasis on manufacturing industry.
1.7 DEFINITION OF TERMS
1 A BUDGET:
The institution of cost and management accountants define budget as a plan quantified in monetary terms, prepared and approved prior to a define period usually showing planning income to be generated and or expenditure to be incurred during that period and the capital to be employed to attain that objective.
2 BUDGETARY CONTROL:
This is the different between planned (budgeted) and actual result (cost). This may be favorable where actual cost is less than a standard (budget) cost. If it unfavorable where actual cost is greater than standard (budgeted) cost. Alternative terms are MINUS OR PLUS variances, respectively.
ORGANIZATION:
This is all establishments whether government or privately owned.
Budgeting As A Tool For Planning And Control In A Manufacturing Industry:
Budgeting is a crucial tool for planning and control in the manufacturing industry, helping organizations set financial targets, allocate resources, and monitor performance. Here’s a breakdown of how budgeting is used in this context:
**1. Financial Planning: Budgets serve as a roadmap for a manufacturing company’s financial goals. By setting targets for revenue, expenses, and profits, the organization can plan for the upcoming fiscal year or other specific timeframes. This is especially important in manufacturing, where there are often significant upfront investments in equipment, labor, and materials.
2. Resource Allocation: Budgets help manufacturers allocate resources effectively. This includes determining how much to spend on raw materials, labor, equipment maintenance, research and development, marketing, and other key areas. It ensures that resources are distributed optimally to support production and growth.
3. Cost Control: In manufacturing, controlling costs is critical for profitability. Budgets provide benchmarks against which actual expenses can be compared. If actual costs exceed budgeted amounts, management can take corrective actions to reduce waste, improve efficiency, or renegotiate supplier contracts. This helps in maintaining profitability and competitiveness.
4. Sales and Production Planning: Manufacturing companies must coordinate their production levels with sales forecasts to avoid overproduction or stockouts. Budgets help align production capacity with market demand, preventing excess inventory carrying costs or lost sales due to product shortages.
5. Capital Expenditure Planning: Manufacturing often involves significant capital investments in machinery and facilities. Budgets help plan and prioritize these investments, ensuring that capital is deployed where it can generate the greatest returns and align with the company’s long-term strategy.
6. Performance Evaluation: Budgets provide a basis for performance evaluation. By comparing actual financial results to budgeted figures, managers can identify variances and assess whether the organization is meeting its goals. This information is crucial for making informed decisions, addressing issues, and adapting to changing market conditions.
7. Cash Flow Management: Effective cash flow management is vital in manufacturing, where large upfront costs are common. Budgets help forecast cash flows, ensuring that the company has the necessary liquidity to cover expenses, service debt, and invest in growth.
8. Risk Management: Budgeting can help identify and mitigate financial risks. By examining various scenarios and sensitivities, manufacturers can assess the potential impact of external factors, such as changes in raw material prices or shifts in demand, on their financial performance. This allows them to develop contingency plans and make informed decisions.
9. Long-term Planning: Beyond annual budgets, manufacturing companies often use rolling budgets or long-term financial plans to chart a course for the future. These plans can extend over multiple years and help organizations adapt to evolving market conditions and strategic goals.
In conclusion, budgeting plays a central role in planning and control in the manufacturing industry. It provides a structured framework for setting goals, allocating resources, monitoring performance, and adapting to changing circumstances. Effective budgeting helps manufacturers maintain financial health, competitiveness, and sustainability in a dynamic business environment.