Management Accounting Techniques In Manufacturing Firms
(A Case Study Of Nigeria Breweries Plc Aba)
Management accounting techniques play a crucial role in enhancing the operational efficiency and decision-making processes within manufacturing firms. These techniques encompass a range of tools and methods such as activity-based costing (ABC), just-in-time (JIT) inventory management, and variance analysis. ABC aids in accurately allocating costs to specific products or processes, providing insights into cost drivers and facilitating better resource allocation. JIT inventory management ensures optimal inventory levels, minimizing waste and reducing holding costs while improving production efficiency. Variance analysis enables managers to compare actual performance against budgeted or expected outcomes, pinpointing areas for improvement and supporting informed decision-making. Together, these management accounting techniques enable manufacturing firms to optimize their operations, control costs, and enhance overall performance in a competitive market environment.
This project attempts to establish the vital role which management Accounting techniques play in manufacturing firms , A case study of Nigeria breweries plc. ,Aba .
The problem addressed under this topic were the impact of management Accounting techniques on firms profitability, decision making and management information. This study is significant, as it will help to reduce the risk involved in decision making. Literature review was done to know what other writers are saying about the topic.
The study covered only one manufacturing firm in Aba Nigeria Breweries Plc, Aba , which has a total work force of 340 employees, 184 employees were selected for saying about through probability based on sampling techniques. The instrument for data collection were mainly oral interview and questionnaire which was distributed among the categories of staff in the company in all 100 questionnaire , were returned and to test the hypotheses and insinuating the research findings.
-FINDING: In hypotheses one, it was established that profit maximization is the major objective of manufacturing the application of management accounting techniques. Hypotheses two, revealed that junior staff does not participate on decision- making of companies as they do not possess the skill to meet the challenges of such decisions. Hypotheses three and four revealed that communication network between accounting techniques and management can help greatly to ensure industrial peace. And that success of manufacturing firms is dependent on the information provided by management accountants.
Title page i
Approval page ii
Dedication iii
Acknowledgement iv
Abstract v
Table of content vi
CHAPTER ONE
1.1 Introduction
1.2 Statement of problem
1.3 Purpose of the study
1.4 Significance of the study
1.5 Statement of hypotheses
1.6 Scope of the study
1.7 Limitation of the study
1.8 Definition of terms
CHAPTER TWO
2.1 Review of Related literature
2.2 Standard costing technique
2.3 Variance (Analysis) accounting
2.4 Absorption costing
2.5 Capital budgeting
2.6 Cost- volume profit analysis
2.7 Summary of literature review
CHAPTER THREE
3.1 Research design and methodology
3.2 Sources of data
Primary
Secondary
3.3 Sample used
3.4 Method of investigation
CHAPTER FOUR
4.1 Data presentation and analysis
4.2 Data presentation and analysis
4.4 Test of hypotheses
CHAPTER FIVE
5.1 Summary of findings, conclusion and recommendations
5.2 Findings
5.3 Conclusion
5.4 Recommendations
BIBLIOGRAPHY
APPENDIX: QUESTIONNAIRE
INTRODUCTION
Without the application of management accounting techniques no business can succeed in it’s operations and attain it’s set objectives. Moreover it’s decision making will not be guided as management accounting techniques provide adequate guide to management making at all levels.
Management accounting is 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.
The chartered institute of management accounting (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 taking , optimizing the used of resource , disclosure to shareholders and others external to the entity , disclosure to employees, safeguarding assets.
According to dictionary definition, management accounting is defined as ‘accounting designed for or adapted to the informational needs of various levels of management.
Conclusively, 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 more effectively plan, making decision and control operations.
While management accounting is concerned with the provision of management information, management accounting techniques is concerned with those practices in management accounting which management should adapt to facilitate management decision making.
According to T. Lucy , management accounting techniques , (1985 : 12) ‘ management accounting techniques is a method which is designed to suit the way goods are processed or manufactured or the way the service are produced’.
The techniques to be adopted by an organization depends on the purpose for which the organization that management accounting practice include those techniques as marginal costing , absorption costing , standard costing , actual costing ascertainment , variance accounting, budgetary control, differential costing , capital budget etc. included project evaluation which checks the viability and feasibility of projects to aid effective decision – making .
Government accounting, social or national accounting and accounting in the formal sector of the economy should be noted.
In this research study Nigeria Breweries has been chosen as a care study. Nigeria Breweries Plc was incorporated on 16th November, 1946 to be a manufacturing company, under the companies ordinance, cap 38 as Nigeria Brewery ltd. On 7th January 1957, the company was changed to Nigeria Brewery ltd on the commencement of operations in a second Brewery Aba. In 1990, when the companies and allied matters act of that year came into force , the name of the company was further changed to Nigeria Breweries Plc. With the acquisition of a controlling interest (54. 10%) in the equity of Nigeria Breweries within the Heineken group, Nigeria Breweries Plc has become a subsidiary of Heineken group. Currently NB has five Breweries at Lagos, Aba, Kaduna, Ibadan and Enugu.
The principal activity of the company is the brewing and marketing of Lager, stout and non-alcoholic malt drinks. The authorized share capital of the company is 3000,000,000 ordinary shares of 50k each while it’s issued and fully paid up share capital is N1, 890,589,564.
Over the years Nigeria breweries Plc has made tremendous success in it’s 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
Management accounting techniques aim 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 profitability, organization, face the problems of ascertaining which products, labour, 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 variables in arriving at a definite decision in the evaluation of projects.
In view of this, the problem treated in this research is management accounting techniques in manufacturing firms a case study of Nigerian Breweries plc, Aba.
1.3 PURPOSE OF THE STUDY
Based on the introduction of the study and statement of the problem given above the major objective of the study are as follows:-
i. To evaluate the relationship between the success of manufacturing firms and management accounting techniques
ii. To find out whether management accountants in manufacturing firms employ management accounting techniques in data analysis.
iii. To explore the usefulness of managerial information in carrying out effective management accounting techniques.
iv. To investigate the categories of staff that participates in management decision making and the impact of such participation on organization’s performance.
1.4 SIGNIFICANCE OF THE STUDY
This study is important because it will assist in reducing the risk involved in decision making. It will help to ensure that every information is properly scrutinized before being employed into decision.
This study will equally be of great value to managers, management of manufacturing firms , the government , shareholder and the entire populace.
1.5 STATEMENT OF HYPOTHESES
The following hypothesis were formulated and tested in the study.
Hypothesis 1
H0: there is no positive and significant relationship between profit maximization and the application of management accounting techniques.
H1: there is a positive and significant relationship between profit maximization and the application of management accounting techniques.
Hypotheses 2
H0: The involvement of junior staff in decision making process dose not enhance the success of manufacturing firms.
H1: The involvement of junior staff in decision making process enhance the success of manufacturing firms.
Hypotheses 3
H0: The quality of information provided by management has no significant impact on the effectiveness of management accounting techniques
H1: The quality of information provided by management has significant impact on the effectiveness of management accounting techniques
Hypotheses 4
H0: there is no positive relationship between the quality of accountant’s information and the success of manufacturing firms.
H1: there is positive relationship between the quality of accountant’s information and the success of manufacturing firms.
1.6 SCOPE OF STUDY
This study is restricted to management accounting techniques as it is used in a manufacturing firm based in Aba (Nigeria Breweries Plc). It studies the extent to which management to plan and control the resources of the organization in order to achieve the objectives of the organizations.
1.7 LIMITATION OF THE STUDY
The problems encountered during the research work were those of time , finance vastness of the area to be covered. Because of these constraints, the researcher limited the scope of this work to Nigeria breweries Plc ,Aba , in Abia state.
The study was further limited by the manner with which respondents approached questions thrown to them on some of the respondents were highly reserved in their comments, some remained unyielding to the supply needed data , while others in one way or the other were subtle and strictly courteous of the answer they supplied.
1.8 DEFINITION OF TERMS
MANAGEMENT: These are combination of board of directors, general managers, functional managers and divisional managers who control the affairs of an organization.
INFORMATION: They are processed data or facts.
TECHNIQUES : These are techniques used to create efficiency in carrying out management accounting responsibilities.
DECISION: This is a choice alternative
MANUFACTURING COMPANIES: These are companies that undertake the production of goods and specialized on large scale by machinery.
PROFIT : This refers to investment (an investment is the capital committed to something which is hoped will bring in some returns of benefits.
INTERPOLATION: The process of finding odd rates of return that do not appear in published interest tables.
CONTRIBUTION: The difference between sales income and variable cost.
Management Accounting Techniques In Manufacturing Firms:
Management accounting techniques play a crucial role in manufacturing firms by providing valuable information and insights that aid in decision-making, performance evaluation, cost control, and strategic planning. Here are some key management accounting techniques commonly used in manufacturing firms:
- Cost-Volume-Profit (CVP) Analysis: CVP analysis helps manufacturing firms understand the relationships between costs, volume of production, and sales revenue. It assists in determining the breakeven point and evaluating the impact of different production levels on profitability.
- Standard Costing: Standard costing involves setting predetermined cost standards for materials, labor, and overhead. Actual costs are then compared to these standards, helping identify areas of inefficiency and allowing for cost control measures.
- Variance Analysis: This technique involves analyzing the differences between actual costs and budgeted or standard costs. Variances are categorized as favorable or unfavorable, and the analysis helps management pinpoint areas that need attention.
- Activity-Based Costing (ABC): ABC allocates costs to specific activities and processes, providing a more accurate understanding of the true cost drivers in manufacturing. It helps in allocating overhead costs more accurately and making informed decisions about pricing and product mix.
- Throughput Accounting: Throughput accounting focuses on maximizing the rate at which products move through the production process, with the goal of increasing throughput and generating more profit. It identifies bottleneck processes and aims to optimize them.
- Job Costing and Process Costing: These techniques are used to allocate costs to specific jobs (customized products) or processes (mass-produced products). Job costing tracks costs associated with each individual job, while process costing is used for products that go through multiple stages of production.
- Lean Accounting: Lean accounting aligns with lean manufacturing principles, focusing on eliminating waste, improving efficiency, and optimizing processes. It helps track and control costs in a lean environment.
- Balanced Scorecard: While not exclusive to manufacturing, the balanced scorecard provides a comprehensive view of a firm’s performance by considering financial, customer, internal process, and learning and growth perspectives.
- Cost Allocation Methods: Manufacturing firms often use various cost allocation methods to distribute overhead costs to products or departments. Methods include direct allocation, step-down allocation, and activity-based allocation.
- Inventory Valuation Methods: Manufacturing firms must choose appropriate inventory valuation methods, such as FIFO (First-In-First-Out) or LIFO (Last-In-First-Out), which impact cost of goods sold and the valuation of ending inventory.
- Capital Budgeting Techniques: Manufacturing firms frequently engage in capital budgeting to evaluate potential investments in new equipment, technology, or facilities. Techniques like Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period are used to assess the feasibility of these investments.
- Performance Measurement Metrics: Manufacturing firms use various performance metrics such as Return on Investment (ROI), Return on Assets (ROA), and Overall Equipment Effectiveness (OEE) to assess the efficiency and effectiveness of their operations.
The choice of management accounting techniques depends on the specific needs and challenges of each manufacturing firm. By applying these techniques, companies can make informed decisions, streamline operations, control costs, and achieve their strategic objectives.