AN APPRAISAL OF THE APPLICATION OF COST AND MANAGEMENT ACCOUNTING TECHNIQUES IN NIGERIAN...
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1 CHAPTER ONE INTRODUCTION I.1 Background to the Study The growing complexity of modern production method results in greater capital investment, competition and modern market. For any company to be successful in such environment, it must have a good costing system. The attainment of this objective demands careful selection of a costing system that suites the production process of the company. Vickery (1971) has this in mind when he said that costing system is essentially analytical in nature, and it is therefore impossible to derive a system which suites all business. Hence, the costing system adopted by a manufacturing company must be designed to suite its production process.
Transcript of AN APPRAISAL OF THE APPLICATION OF COST AND MANAGEMENT ACCOUNTING TECHNIQUES IN NIGERIAN...
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CHAPTER ONE
INTRODUCTION
I.1 Background to the Study
The growing complexity of modern production
method results in greater capital investment,
competition and modern market. For any company to be
successful in such environment, it must have a good
costing system. The attainment of this objective
demands careful selection of a costing system that
suites the production process of the company. Vickery
(1971) has this in mind when he said that costing
system is essentially analytical in nature, and it
is therefore impossible to derive a system which
suites all business. Hence, the costing system
adopted by a manufacturing company must be designed
to suite its production process.
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A common misconception made by management of a
company is that a single definition of cost is
ideally suited to all types of manufacturing
decision. What a manager’s plan to produce must be
well known to him and always taken into account where he fails to
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realize this, difficulty arises in determining thecost of production. This
gives rise to two reasons for the difficulty in
determining the cost of products produced. First,
the relationship between the cost incurred and
output produced is often difficult establish.
Secondly, cost may be assembled, combined and
reported in different ways.
In addition to inherent difficulties in
determining the cost of output, management fails to
recognize that different cost measurement are needed
for different purposes.. If cost information is to be
used intelligently, management must understand that
any cost figure has inherent limitation and that no
single method of arriving at cost will serve equally
well for all the various purposes for which
information is needed.
well known to him and always taken into account where he fails to
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Modern technology makes it imperative for a firm
to cost its products. Lagne, (1984) contends that if
a firm fails to cost its products, the firm will
continually cease to exist.
Cost determination is essentially concerned with tracing of cost
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through to the end department and product. This tracing can be in
terms of economic benefits, causes and effect of divergence from plan.
A costing system provides a reliable means of
determining the cost of production. An important
future of costing system is the firms measurement and
allocation of resources which the firm solves its
problem permanently in order to safeguard its
existence. Bhathachangy (1980) points out that from a
management point of view perhaps, the most important
use of a costing system is for revenue decision. But
in addition to that, elements of costs are not used
as a basis for logical accumulation of cost figures,
but also for diagnosis.
However, the costaccounting technique is
planning, credit control,
Cost determination is essentially concerned with tracing of cost
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decision making, queuing theory etc. A firm with
these costing techniques or systems will produce and
sell at a high profit or at loss. This is due to
the fact that the firm fails to adopt a proper
costing system or the implementation of the system
adopted is weak.
Batty (1974) contends that a costing system adopted by any firm
investigated.
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should be the most appropriate for the firmconcerned, where
management arrives at a decision without the aid
of adequate
and correct costing data, is to invite problems. More
so, where there is weakness in the implementation of
the system adopted, aims and objectives of the system
will be defeated.
Cost and management techniques serve as
useful tool for inventory
valuation, revenue decision making, cost control,
credit control and price setting when they have been
carefully designed and implemented. Apart from these,
costing system can provide the basis through which
the efficiency of the firms operations can be
measured. Such tools are standard costing and
Batty (1974) contends that a costing system adopted by any firm
investigated.
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budgetary control.
Standard costing involves the detailed estimation
of the cost of a product before it is
manufactured so thatexpenditures
can be controlled during production, on
completion, the actual result will be compared with
the estimated result and variance ascertained
and
Budgetary control is the establishment of departmental budgets,
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relating the responsibility of executive to therequirement of a policy,
and the continuous comparison of actual with
budgeted results either to serve by individual
action the objective of that policy or provide a
firm basis for revision .The reason for determining
variance is to enable costing system to not only
accumulate cost data but also to find out reasons for
them and taking appropriate action where
necessary( Arhuhie, 1989).
In order to understand the nature of modern
complex industry there is need for a better
understanding of costs and how they behave. However,
management of a firm may consider that setting of
price is a matter of judgment, play an important part
in deciding deficiencies. What is required is a
critical analysis of cost incurred. This in turn
Budgetary control is the establishment of departmental budgets,
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requires the knowledge of costing techniques.
1.2 Statement of the Problem
The aim of the research work is to find out the
cost and management accounting techniques to be
established in manufacturing companies,
hence the life wire of every country’s economy lies upon the state of its
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manufacturing companies. So if manufacturingcompanies adopt the
appropriate techniques, they will strive or do well
and also the state of the economy will improve. For
manufacturing companies to be healthy, it is a
function of how costing techniques is managed. It is
to this end that the researcher wishes to appraise
the various cost and management accounting techniques
such as planning, cost control, standard costing,
credit control decision making and the recently
emerged management techniques such as linear
programming, decision theory and queuing theory are
employed by manufacturing companies. The
aforementioned techniques that best suites
manufacturing companies and will be the key in the
appraisal of their application by manufacturing
companies
hence the life wire of every country’s economy lies upon the state of its
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are:
Standard costing: Simply reporting cost to management does little to
help control costs. Cost accounting
can be improved upon by introducing a
formal system of standard costing.
Absorption costing: The common product costing practice of applying
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fixed factory overhead to the goods produced.
Marginal costing: The variable production of product and services are
separated from the fixed cost and also a costing
mechanism for showing the effect of profit on change
in volume of output.
Budgetary control: Scientifically planning ahead is ameans of control in
which the actual state of affairs is compared to plan
for, so that appropriate action may be taken with
regards to deviation before it is too late.
The aforementioned techniques will be appraised
and seen how their application affects manufacturing
companies.
It is noted that many of the manufacturing
companies do not employ the use of these relevant
cost and management accounting techniques
Absorption costing: The common product costing practice of applying
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aforementioned which hinders the effective decision
making in these organization.
To this end, the researcher seeks to find out
whether cost and management
accounting techniques are used in
manufacturing
companies and if they are not in use, how such companies would view
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the importance of these usage forthe effective efficiency and
profitability of the companies .
1.3 Objectives of the Study
I. To find out the desirable conditions before
designing and installing a cost and management
accounting techniques for
manufacturing companies.
II. To ascertainhow costand management accounting
techniques designed for Benue Brewery Limited
assist management in planning controlling and
decision making
III.To determine the factor that hinders the
effective use of cost and management accounting
technique in Benue Brewery Limited
1.4 Research Questions
companies and if they are not in use, how such companies would view
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I. Do manufacturing companies use the desirable
condition for designing and installing a cost and
management accounting techniques?
II
Do cost and management accounting techniques designed for Benue
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Brewery Limited assist management in planning, controlling and
decision making?
III.What are the necessary factors that limit the
effective use of cost and management accounting
techniques in Benue Brewery Limited?
1.5 ResearchHypotheses
Akpa and Angahar definea research
hypothesis as a conjunctional
statement or general phase which cannot be determined
until it is proven.
In a related development, Asika, (1991) said a
null hypothesis is central in research and is the
hypothesis that is tested. The word No which is the
null hypothesis (Ho) will be stated in the negative
assertion from which its alternative (Ha) will be
II
Do cost and management accounting techniques designed for Benue
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used for a positive assertion form.
Following the above, the research hypotheses will be thus:
Ho1:
manufacturing companies do not use the desirable condition
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before designing and installing a cost and management
accounting technique.
Ha1: Manufacturing companies use the desirable
condition before designing and installing a cost
and management accounting technique.
Ho2: The cost and management accounting techniques
designed for Benue Brewery Limited do not
assist management in planning, controllingand
decision making.
Ha2: The cost and management accounting technique
designed for Benue Brewery Limited
assist management in planning,
controlling and decision making.
Ho3: Power, raw material, technology do not hinder
the effective use of costand management
Ho1:
manufacturing companies do not use the desirable condition
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techniques in Benue Brewery Limited.
Ha3: power, raw material, technology hinders the effective use of cost
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and management accounting techniques in Benue Brewery
Limited.
1.6 Significance ofStudy
The study when successfully completed will
be of great importance in the application
of cost and management accounting techniques and
those who are intending to adopt the technique. This
is because, the research will review the role of cost
and management accounting techniques to manufacturing
companies both private and public. This will also
enlighten manufacturing companies’ operators so as to
carry out the business effectively and efficiently.
The study will serve as a useful material for the
management of Benue Brewery Limited, researchers
and other companies in the
Ha3: power, raw material, technology hinders the effective use of cost
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manufacturing industry.
In addition, this research work will be, an addition to the stock of
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material available to the researcher in the area of cost and management
accounting techniques.
1.7 Scope of the study
The purpose or aim of this research is to
appraise the application of cost and management
accounting techniques as a powerful tool used in
manufacturing companies to evaluate their decision
making in order to achieve the predetermined
objective of the company.
However, due to large population of manufacturing
companies in Nigeria, the topic has been narrowed
down to Benue Brewery Limited which serves as a case
study for the research. Therefore, it is within the
researchers reach.
1.8 Definition of Terms
In addition, this research work will be, an addition to the stock of
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I. Absorption Costing: A principle whereby the full
cost of production, direct labour, direct material
and manufacturing overhead are allocated to units
produced during the period.
II
Break- even- point: The point at which revenue fully covers all
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expenditure and only that, no margin of profit exist.
III.Budget: A financial and/or quantitative statement
and approved prior to a defined period of time, of
the policy to be pursued during that period for the
purpose of attaining a given objective.
IV. Cost Allocation: The allocation of whole items of
costs to cost units or cost centres.
V. Cost apportionment: The cost allotment of a
proportion of items of cost to cost units or cost
centres.
VI. Cost control: The regulation by executive action of
the cost of operating and undertaking
VII. Queuing: It is simply the mathematical approach
to the analysis of waiting lines.
CHAPTER TWO
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LITERATURE REVIEW
2.1 Introduction
This chapter is mainly concerned with reviewing
existing literature relevant to the topic, Appraisal
of the Application of Cost and Management Accounting
Techniques in Nigerian
Manufacturing Companies. The chapter
covers the following areas.
2.2 Conceptual framework
The growth in complexity in manufacturing process during the
20th and the 21st century give rise to cost other than
labour and materials as a significant part of total
cost of production. More so, the increasing use of
heavy power equipment and the developmentof mass
production techniques made the t recognition of
CHAPTER TWO
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overhead cost a necessity. The effect of these led to
the development and expansion of cost accounting.
Between 1890 and 1915 cost accounting grew rapidly. The
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formulation of cost accounting basicstructure and mechanic for
integrating the cost record and general accounts were
devised this period. The development resultedin
an improved method of calculating income
for industrial firms, inventory valuation and a
better matching of revenue and expenses.
These basic structure and
mechanism are briefly reviewed below.
2.3 Costing system
The general rule of cost determination is
the same in the various production circumstances,
the various production can be said to constitute
different costing system.
According to Horngren(1989), the primary
objective of cost accounting is to
Between 1890 and 1915 cost accounting grew rapidly. The
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show the total cost of the articles the
manufacturer produces, and then analyses the
composition of the cost so that effective
control over such element of cost can be exercised.
To achieve this objective, organizations use costing
system. Batty (1974) defined a
system an established sequence of procedures for the purpose of
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achieving specified objective at a minimum cost. The use of the word in
costing is usually limited to a major set of
procedures which result in achieving a number of
objectives.
It is also a formulation of the internal
financial information systems. Biggs(1972) realized
the importance of cost accounting and stated that
without a system of cost account, it is doubtful
whether a business of any size , nature can survive
in the intensely competitive
condition of today, but it must be emphasized that
just like no two business are
alike, even in the same industry,so no
ready-made system of cost account can be
provided to suite each and every business. The
underlying principles, conventions and objects of all
system an established sequence of procedures for the purpose of
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costing systems are the same, but the application of
these principles and methods by which the objects are
to be achieved must vary with circumstance. A good
costing system should aim at accomplishing the
following purpose:
I.
To arrive at the cost of producing every unit, job, operation, process,
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departments or services and develop cost standards.
II. To indicate to the management any
inefficiencies and the extent of various forms of
waste whether of materials and time expenses or in
the use of machines equipments and tools.
Accordingto Johnson and Kaplan (1987), a
management accounting system must provide likely
and accurate information to facilitate efforts to
control costs, to measure and improve productivity
and to devise improved production process.
The management accounting information must
also report accurate product cost so that accurate
pricing decision , introduction of new products,
abandonment of other variable overheads it demands
that fixed cost of the relevant periodare written
off in full against the aggregate contribution. The
I.
To arrive at the cost of producing every unit, job, operation, process,
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contribution is the difference between the sales
value and the variable or marginal cost of a product
in a given period of time (CIMA) And this is the
base that many items make up the total cost of job
etc. vary in total volume of production, there
are others for example, many
overheads which are constant irrespective of the level of production.
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Some of the above mentioned methods may be thebasis of a uniform
systemcosting.
Historical costing on the other hand is concerned
with past costs such as those already incurred. We
also have absorption costing. Absorption costing is
traditional approach to valuing inventory and
determining the cost of goods sold. The fixed cost of
production, direct labour, direct materials and
factory overheads are absorbed by or associated with
the time produced during the period.
2.4 Management Accounting
The management Accounting Practices
Committee(MAPC) of the National Accounting
Association(NAA) in the United
States define management accounting as “the process
overheads which are constant irrespective of the level of production.
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of identification, measurement
, accumulation , analysis, preparation and
communication of financial information used
by management to plan , evaluate , and
control within an organization and to
ensure appropriate use of and
accountability for its resources.
Management accounting may also bedefined as “ the
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application of professional skills in thepreparation and presentation of
accounting information in such a way as to assist
management in the formulation of policies and in the
planning , and control of the operations of the
undertaking” (Sizer,1996).
In the sense that management will be
interested in any information
produced by an accounting system, an accounting
could be management accounting whether it
was for example published accounts mainly for
external consumption or routine product cost for
internal use. However for practical purpose, such a
description is too broad and imprecise. It is to this
end that T. Lucy (1983) sees management accounting to
be concerned with the provision and integration of
information required by management of all levels for
Management accounting may also bedefined as “ the
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the following purpose.
a. Formulating the policies of the organization
b. Planning the activities of the organization in the
short medium and long term, i.e. strategic through
operational planning.
c. Controlling the activities of the organization
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d. Decision making i.e. the process of choosing between alternatives.
e. Performance appraisal at strategic departmental andoperational levels.
Management accounting therefore is primarily
concerned with data gathering( from external
and internal sources) analyzing,
processing, interpreting and communicating the
resulting information for the use within the
organization so that management can more
effectively plan, make decision and control
operations.
To carry out this task efficiently, the management accountant will
use data from financial and cost accounting systems,
he will conduct special investigations to gather
required data, he will use accounting techniques and
appropriate techniques for statistics and operations
c. Controlling the activities of the organization
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research, he will take amount of the human elements
in all activities he will be aware of the underlying
economic logic, he will do all he will produce
information which is relevant for the intended
purpose.
2.5 Relationship of Management Accounting and CostAccounting
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There is no realistic dividing line between cost accounting and
management accounting particularly with regard to
provision of information for planning and
control. Cost accounting is at a more basic level
than management accounting and in many organizations
is primarily concerned with the ascertainment of
product costs. Because the cost accounting system
is an importantsource of data for
management accounting purpose, organization,
student must be totally familiar with basic
accounting principles and methods and their
conventions and limitations.
2.6 Cost Accounting Techniques
In his effort to provide cost information for
managerial purpose and objective, the accountant
2.5 Relationship of Management Accounting and CostAccounting
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uses a variety of techniques at his disposal.
Costing systems are used to monitor and evaluate the
element of cost used and to determine whether the
firms cost performance is worth meeting its
objectives. Thus, whether the firm survives,
stagnates
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or dies, it depends on how it reacts to cost
information collected by costing system and
subsequently evaluated costing techniques.
Then choice of the techniques to be employed is
decided by the size of the firm,
costing system decision and objectives of
the management team themselves. Accordingly to
Harper (1996), costing technique depends upon the
purpose for which management requires the
information. Management needs information for a
variety of purpose such as control and price
determination and the exact purpose determine the
techniques to be used. Therefore, one costing
technique may be desirable for one particular purpose
and for another. They may not be exhaustive. Costing
techniques available to the management accountant
are: Standard costing, marginal costing, and
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absorption costing, budgetary control, linear
programming, queuing theory and decision making.
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2.6.1 Standard Costing
Batty (1974) defines standard costing as a
system of cost accounting which is designed to
show in details how much
each product cost to produce and sell when a
business is operating at a stated level of
efficiency and for a given volume of output. Simply
reporting actual cost to management to help them
control costs, cost accounting information can be
improved upon by introducing a formal system of
standard costing.
According to ICMA, standard costing is
predetermined cost calculated in relation to a
prescribed set of working conditions
correlating technical specifications and
scientific measurement of materials and labour to
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price and wages rate expended to apply during the
period to which the standard cost is intended to
relate with an addition of an appropriate share of
overhead. It can be deduced from the above
definitions that standard costing is a target
which shows what is planned or expected. It is a
should be cost. Standard costing is analogous to
budgetary control while budgetary control deals with
the
whole organization, standard costing deals with units rather than the
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whole organization. The standard cost of a product under normal
conditions. These implying very careful obsolete
product responses to rival product can be made.
Therefore costing system is a set of procedures
used to collect, assemble record and attach cost
incurred to the cost centre or product. They serve as
tools to collect and calculate costs related to
production of a particular output. The
characteristics and problems of companies differ
from company to company. Not surprisingly, cost data
can be accumulated, arranged and presented in
different forms. This results to the development of
various costing systems to be adopted. The
adoption of any kind of costing by an organization
depends on the following:
whole organization, standard costing deals with units rather than the
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i. The kind of product or nature of activity it undertakes.
ii. The methods of manufacture in use( terminal or continuous)
iii.Suitability of a method to an organization in terms
of functional areas and the types of information
required by its executives.
It is possible however, to arrive at certain broadly defined
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classifications of system which are suitable for various types of
industries. The most usual grouping of these classes is as follows.
1. Job (contract or terminal) costing, a
scientific costing where it is described to
obtain the cost of a number of contract
operations or undertaking which are often
distinguished
Batch costing where the order which may be for a
single article, or a batch of similar articles, is
the most convenient units of activity for purpose.
Terminal (contract costing).
2. Process costing involves an attempt to compute the
cost of a product for process, operations or
manufacture. The process costing example may be the
products produced by one or more number of
It is possible however, to arrive at certain broadly defined
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processes. Variants of process costing are:
Single or output costing: The name given to the system used by
business supplying a product of the same type.
Operation (working) system costing, asystem of costing for an
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undertaking which renderservices.
Departmental Costing, a costing for operating
department of a business or cost of products
emanating from a department Furthermore, two other
kinds of costs determined for special purpose
of control
and policy are :
i. Standard costing: It is the planned unit of
cost of the products, components or services
produced in a period. The standard cost may be
determined on a number of bases. The main use of
standard cost is in performance measurement, control,
stock valuation and in the
establishment of selling price (CIMA).
The techniques encourage
management and employees since it ensures that they
Operation (working) system costing, asystem of costing for an
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have no plan ahead and also serve as a basis for
quoting for jobs or fixing prices.
ii. Marginal costing: It is looked upon as a decision making technique used
to determine the effect of cost on changes in the
volume of time and output in a multiproduct from
especially in the short run. Thus, it is a technique
which emphasizes the variable cost of a product
that is the
direct material, direct labour, direct expenses and assessment of the
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quantities and price of all the resourcescombining to create each
product. When this has been accomplished, it is then
a relatively easy matter to modify the recording of
transactions in accounting system real difference
that arises between actual and standard cost of
material and labour. The actual cost of production
are still recorded , but are divided so as to
value all stock accounts at standards costs
,and to direct any difference between
actual and standard costs into
appropriate labeled variance accounts (Kenneth,
1974). The variance as analyzed into their causes and
point of incidence and corrective action taken.
Standard costing is most effective in industries
where products and processes are standardized, for
instance when there is only one product and where
direct material, direct labour, direct expenses and assessment of the
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production processes are continuous.
Horngren(1990) holds the view that standard costing
procedures tends to be most effective when they are
accepted to process costing, mass continuous and
repetitive production tends themselves rather easily
to selling standards. He further stresses that,
the intricacies conflicts
between average and FIFO costing methods are eliminated by using
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standard cost. In addition, standard cost approach facilitates controls.
2.6.2 Absorption Costing
According to Horngren, (1990), absorption
costing refers to the common costing practice to
applying fixed factory overhead to the goods
produced. Peters(1984) defined absorption costing as
a practice where all costs are charged to
process product or operation whether fixed or
variable cost with the current heavy equipment and
large investment in capacity , the growth of
overhead costs increased rapidly, it made
intuitive sense to include in unit costs of
inventory all the cost necessary to make it
saleable, including the cost of capacity with
absorption costing all production cost are treated
as period cost , that is each unit has a portion of
between average and FIFO costing methods are eliminated by using
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the fixed cost. Absorption costing is the general
accepted in general financial reporting.
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2.6.3 Marginal Costing
Marginal costing revolve around cost analysis
from a fixed and variable view points, with marginal
costing all variable production cost and all non-
production costs are treated as period cost.
Marginal costing is the procedure whereby the
variable cost of product and services are separated
from the fixed cost and also a costing mechanism for
showing the effect of profit on changes in the
volume of output. It can also be regarded as a
system of presenting costing to management to
facilitate effective cost control. It is prime
cost plus variable overhead.
It is also regarded as out of power cost or
additional cost incurred in producing one unit. One
of the great merits of marginal costing is that it
presents information in a form which is far less
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rigid than most of the information presented on
absorption costing basis.
2.6.4 Budgetary Control
The word budget is derived from the French word “bongette”
denoting leather pounch in which money is kept for meeting envisaged
expenses. For our purpose, a budget may be defined as, a financial and
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or quantitative statement prepared and approvedprior to a defined
time period expressing the plans, policies and
programmes to be pursued by a government enterprise
over the period for the purpose of attending some
given set of objectives.
According to A.L Buhari (2001) a budget
may be simply defined as a document indicating the
total and the composition of government expenditures
and the source from which such expenditures are
expected to be financed in the course of the year.
When a government plans its annual expenditures and
revenues in such a way that both are equal, the
budget is said to be balance.
According to Vikery(1971) budgetary control is
scientifically planning ahead and is a means of
expenses. For our purpose, a budget may be defined as, a financial and
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control in which the actual state of affairs is
compared with the planned for , so that appropriate
action may be taken with regards to deviation before
it is too late. Budgetary control involves the
formulation of a plan for each branch of industrial
activity covering a fixed future period. It also
implies that managers are
responsible for mistake for deviation from budgeting plan. This is its
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corrective functions. Within this context,budgetary control also
the
application of rules for the monitoring and
harmonizing of production, administration and general
business and non business activities of the firm in
accordance with the firms objectives.
Anintegrated budgetarycontrol system will
include a budgeted profit within
the framework of a master budget and
coordinated functional budget. The main purpose of
budgetary control is the calculation of an evaluation
of variance which is derived from the comparison of
actual with budgeted activity of the firm.
2.6.5 Queuing Theory
According to Azende T. (2011), queuing theory
responsible for mistake for deviation from budgeting plan. This is its
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is used to study the phenomenon of waiting in line
longer than they have to. The theory allows
researcher to analyse several things such as curving
in line, waiting in line, and the time it takes to
serve customers.
According to Agburu J.T (2001), queuing theory refers to the set
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of ideals or principles that relates to waitinglines. The set of concepts,
ideas, rules, principles and processes
that help to explain the phenomenal of
waiting lines known collectively as queuing theory of
waiting lines. This comes as a result of planning and
analysis of services capacity. There are several
queuing disciplines that havebeen
developed because of queuing theory. Five of which
are FIFO, LIFO, processor sharing and priority. FIFO
describes the practice of servicing customers in the
order they arrive in so that the person waiting
longest is served first while LIFO describes the
practice of serving customers so that the person who
come in last leaves first, such as in the process of
riding an elevation processor sharing serves
customers at the same time to that the average
According to Agburu J.T (2001), queuing theory refers to the set
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waiting time for all customers is about the same. The
priority discipline serves the customers with the
highest priority first.
Consequently, any manufacturing company
designing a service system must have the queuing
theory in mind and weigh the cost of
producing a given services against thepotential cost of having
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customers wait for services.
2.6.6 Linear Programming
Linear programming is one of the
most widely used quantitative decision
technique in business and industry in modern times.
Its application is becoming increasingly vast
in production. Linear programmingcanbe looked upon
as adecision making technique between and
among the variables which represent the different
events or phenomena happen to be linear (Agburu J.T
). The technique used in allocating resources where
more one key factor or constraint is involved. It is
a method of solving equations and can be programmed
for computer so that difficult and
multi-constraint problems will show scarce
resources in a firm can best be utilized.
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2.6.7 Decision Making
Decision making is said to take place wherever
an individual, firm (known as decision maker) has to
choose one course of action from several alternative
courses of action.
According to Stoner et al (2000:239) decision
making is the process of identifying scheduling a
course of action to deal with a specific problem or
take advantage of an opportunity. This means that
decision making is a process, a theory, while
decision is the outcome of the process. Souza states
that “decision making is the process of making up
one’s mind”. Ivancevich et al (1994) sees
decision making as “a series of or chain of related
steps or interconnected stages that leads up to an
action or an outcome and assessment” .In the same
light though not in the same words, decision is seen
38
as the conscious effort made to achieve an objective.
The efforts are consciously made meaning that
environmental and contextual factors come to play in
decision making and its aim is to achieve an
objective. Decision making is a frequent phenomenon
in business, economics, politics other spheres of
human
life. The production manager for instance must decide that product to
39
produce, when to produce the product and how to produce the product
of interest.
2.7 Major Themes in Management Accounting
There are a number of important themes which
pervade all aspect of management accounting. These
themes are discussed below under the following
headings, future orientation, economic reality, goal
congruence, information system,
statistical operational
research technique, uncertainty.
2.7.1 Future Orientation
Much of the work of management accountant is
concerned with the future for example,
the provision of informationfor policy
formulation for planning for decision making. In
life. The production manager for instance must decide that product to
40
details, these activities may involve forecasting
future costs and revenue estimating future rates
of taxation, interest and inflation, considering the
reaction of market and revenue, competitors to the
introduction of new products
and price analyzing the likely charges in the cost structure and
41
productivity consequent upon the introduction of new methods and
equipment, assessing the effects of
government policies on the
operations of the organization (CIMA).
2.7.2 Economic Reality
Accounting data and information are used to
represent the underlying economic activities of the
organization which include buying, materials, selling
product, manufacturing and financing the
organization. Accordingly, it is essential that the
records of past performance and the information
derived from the records which is used to guide
future planning and decision making
represents the underlying economic realities in
clear and unambiguous manner unfettered by
and price analyzing the likely charges in the cost structure and
42
accounting conventions.
Victor Smith (2011) this the direction we need
to go creating a model of
economic that takes with accounts a greater
range values than simple consumerism, part of the
problem with the world today is
that we have allowed ourselves to be defined first identity is what
43
derives progress and innovations. The growthparadigm as evidenced
by nature is not about expansion in the usual term
but about increasing the complexity of interacting
systems and about achieving balance between those
systems. Humans have done a poor job at finding that
balance because we have choosen to look at native
primarily as a resource to fuel our own needs, rather
than adding as a matter partners in the ecological
web.
Standard-issues economics is now just at the
stage of getting parts its own adolescence.
Hopefully, it really to grow up now and embrace a
nuanced system of values than just consumption for
its own sake. There are many out there but we need to
be tied into that limit of business whose core values
include maintaining natural system, respect for
that we have allowed ourselves to be defined first identity is what
44
employees and their contributions, community values,
and a style of innovation that is more all
encompassing than just the bottom line.
2.7.3 Goal Congruence
45
This simply means that the management accounting system
should encourage all employees, including
management to act in a fashion which
contributes to the overhead objectives of
the organization, and objective would in ideal
circumstance coincide. The system and the approach
adopted by the management accountant should
motive staff by means of
genuine participation, goal communication and
rapid feedback and in much other way. Goal congruence
is a result of the aliment of goals to achieve an
overarching mission.
Goal congruence is one of the most important
functions of management to harmonise as far as it is
practicable the goals of the participants and sub-
2.7.3 Goal Congruence
46
units with those of the organization as a whole. This
function is known as goal congruence (Victor Smith
2011).
2.7.4 Information System.
47
According to Begnon- Davies P (2009) informationsystem is any
combination of information technology and
people activities
that support operations, management and decision
making. In a broad sense, the term information
system is frequently used to refer to the
interaction between people, processes, data and
technology. In this sense, the term is used to refer
not only to the information and Communication
Technology (ICT) than an organization uses but also
to the way in which people interact with this
technology in support of business processes. The
components are people, hardware, software, data and
network.
An organization comprise a number of information
2.7.4 Information System.
48
system or networks frequently computer based
sometimes .These are separate information system
dealing with sales, production, personnel, finance
and other matters .Sometimes there is integration of
these sub-system. Rarely, if ever, is the
information system a totally integrated one
dealing with all aspect of management
requirement for planning,
control and decision making. In any organization, the management
40
accounting system is designed in accordancewith the principles of
system theory otherwise they will be less efficient.
An example of this could be where a poorly designed
budget system causes a manager to act in a manner
which, although advantageous to the department, but
detrimental to the overall objective of the
organization (Kroeake DM,
2008).
2.7.5 Statistical and Operations Research Techniques
According to Perty Bridman, it is a discipline
that deals with the application of advanced
analytical methods to help make
better decision. It is often considered to
be a sub-field of mathematics. Perty brought
operational research to bear on problem in physics in
control and decision making. In any organization, the management
41
the 1920s and he later attempt to extend this to the
social sciences.
Stafford Beer (1967) hold it that research is
based on principles, strategies and numerical
algorithms to improve an organization ability
to enact rational and meaningful management decisionby arriving at
42
optional or near optional solutions to complex decision problems.
Certain aspects of management accounting,
particularly in the area of planning and decision
making do level themselves to the use of appropriate
statistical and operational research techniques. The
use of such techniques does not alter the underlying
objective of management accounting but helps to
improve or refine a particular solution. Frequently,
these techniques are implemented by means of computer
packages and to interpret and present the result
produced.
There are numerous areas where such
techniques have been found to assist management
accounting. Examples include, statistical forecasting
cost and sales extrapolations, linear
to enact rational and meaningful management decisionby arriving at
43
programming for resources allocation to provides
such as production, planning economic order quantity
models to help solve inventory control problems and
so on.
It is important that the management accountant has sufficient
44
familiarity with such techniques to recognize wherethere user can be
beneficial and cost effective. The use of relevant
techniques should be seen as a normal part of the
work of modern management accountant (Gerald E
Thompson (1982)
2.7.6 uncertainty
Uncertainty according to Saasongu Nongo (2005) as
a situation occurs when a decision maker is not aware
of all possible alternatives and for those
alternatives that are identified information
is not adequate to permit certain
identification of probable outcomes
(consequences). Under this situation, the decision
maker may have strong options but lack adequate
information to estimate the likelihood of different
It is important that the management accountant has sufficient
45
outcomes or their alternatives. The influence of
uncertainty usually increases the longer the planning
or decision period but it is frequently present in
short run circumstance as well. There may be
uncertainty about the measurement of data, material
cost, the action of competition, the economic
climate, wage rate, performance level, the
rate of inflation or indeed any of the meriads of factors involved in a
46
decision.
CHAPTER THREE
47
RESEARCH METHODOLOGY
3.1 Introduction
A research is a problem induced activity. It is
simply a way in which scholars investigates
various problems with a view to
understanding and providing explanation. Aver(1958)
contended that it is essentially based on scientific
inquiry whose procedure s include observation of the
available factors relating to a particular followed
by the formulation of a theoretical solution which
is used as a basis for experimental practical
testing of theory to obtain
evidence for a conclusion or
generalization which may or may not validate the
theory.
CHAPTER THREE
48
A research methodology therefore, is the plan by
which a research activity is to be carried out.
Each step in the plan, the activities or subject
to be used, the plan are all summarized under the
methodology
.In fact, according to Abarry, 1986 the methodology iswhere the whole
research is based. He further outlines variousmethods that can be
49
employed by researchers.
However, the appropriate method adopted in this
research is survey research and descriptive methods.
This chapter will also consider some data
collection method with a particular attention to the
most suitable of the study.
3.2 Research Design
Research design according to Osuala, ( 2001) is
the blueprint or plan which determines the nature
and scope of the study carried
out or proposed. The research design provides a
guideline or framework for an investigation in the
process of trying to find a solution. it is the main
plan for the research project.
This study by nature is a survey research.
According to Agburu (2001) survey research may be
research is based. He further outlines variousmethods that can be
50
described as the research involves large and small
population from which sample are chosen or studied
in a bid to find out
relative incidence, distribution and
interrelation of
sociological or psychological variables. A survey research may also be
51
called a sample survey.
The adoption of survey is as a result of the
ease with which the relationship between variables
can be developed and hypotheses tested. The method
will logically explain the outcome of values as it
relates to the statement of the problem.
3.2.1 Population andsample size
The first step in obtaining a sample is to define
the population. By this, it means the identification
of characteristics, which members of the universe
have in common and which would identify each
unit as having a member of a particular group
(Osuola, 1993) to make for an effective research
work, the best way is to study the entire population
of elements (people/ things) or to study only a
portion of the elements from the large population
sociological or psychological variables. A survey research may also be
52
of them which is called a sample( Black,
1976).
The population of this study is the staff of Benue Brewery Limited,
53
to ensure that every staff is adequatelyrepresented, as the sample size,
purposive sampling technique wasemployed.
Thus, out of 230 staff of the four departments,
questionnaires were given to each
department: production, finance,
marketing and engineering.
3.3 Method Of Data Collection
Data, according to Abarry, (1986) are not truth
in them but are a manifestation of a given situation.
A researcher seeks an explanation by subjecting the
data to his inquisitive mind to facilitate his work.
Data used for this research could come from two broad
sources namely primary and secondary sources. The
researcher in the course of collection of data makes
use of both primary and secondary data.
The population of this study is the staff of Benue Brewery Limited,
54
The main instrument used in the collection of primary data was
questionnaire administered to staff of the four
departments of Benue Brewery Limited. The
questionnaire which is the source of primary was
designed in such a way that it permits comments from
the respondents.
The secondary data refers to information collectedby other agencies
55
but with the utility for the research in his studies(Abarry, 1986). In this
research, secondary data will be gathered from the
four departments of the Benue Brewery Limited,
libraries, journals, articles, company
records, and textbooks.
3.3.1 Method of Data Analysis
The analysis of the raw data of a research is the
means by which the researcher problem is answered and
the hypotheses tested. Various methods of data
analysis include the chi- square, correlation
analysis and the Coehran’s question test. The
method used varies with the nature of the
research work.
For the purpose of this research work, the chi-
square test will used. The response from the
administered questionnaire was tabulated and
The secondary data refers to information collectedby other agencies
56
analysed. Relevant question will be used to test the
various hypotheses using the chi-square statistics.
According to Osuala ( 2001) the chi square is
frequently used in testing a
hypothesis concerning the difference
between a
set of
observed frequencies of a sample and a correspondingset of expected
57
or theoretical frequencies, the formula for calculating chi- square is as
follows;
X2 = (∑ o -e ) 2
E
Where
X2 = chi- square
∑ = Summation
symbol O = Observed
frequency E =
Expected frequency
To list the hypothesis formulated, the
following steps are followed.
First, the null hypothesis and the
alternative hypothesis are stated.
Secondly, chi- square is
observed frequencies of a sample and a correspondingset of expected
58
computed between the
observed frequency and the expected
frequency.
Thirdly, based on the decision rule, the nullor the alternative
50
hypothesis is accepted or rejected based on the chi- square result.
The level of significance is 5%.
Decision rule:
The general rule is that where chi- square (x2)
calculated is greater than the tabulated value; the
null hypothesis is accepted while the alternative is
rejected.
Declaration of Known Problem with Design
The researcher used questionnaire as his
instrument of data collection.
i. The major problem encountered here is that the
respondent is left alone to freely respond to the
question and would not usually fill in the right
thing because since his interviewer is not there
with him to read his non-verbal question, he hides a
lot of facts.
Thirdly, based on the decision rule, the nullor the alternative
51
ii. Some respondents would not return the questionnaire
administered to them.
52
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Introduction
It was established in the preceding chapter
that data would be collected using questionnaires and
the hypotheses stated in chapter one tested using
chi-square (x2) model test. This chapter therefore,
presents analyses and interprets data collected from
the field work using questionnaires. The hypotheses
are also tested and results interpreted.
4.2 Data Presentation Analysis
The data presented and analysed here are those
obtained from questionnaires administered to
respondents. Hence, the table hereunder shows the
total number of questionnaires
administered to the respondents including
53
those issued and those returned respectively.
52
TABLE 1: QUESTIONNAIRES ISSUED AND RETURNEDRespondent Questionnaires
issuedQuestionnairereturned
Percentage ofreturned questionnaires
Top managers 90 86 40%
MiddleManagers
85 80 37%
Employees 55 50 23%
Total 230 216 100%
Source: Field Survey, 2012.
Table 1 above indicates that out of the 230
questionnaires that were issued, only 216
questionnaires were returned. The analysis as well as
interpretation of results will henceforth
be based on the 216 questionnaires
that were returned. The table below represents the
responses collected from the respondents from various
questions asked.
53
Question 6. Do cost and management accounting techniques
help in production process?
TABLE 2: TABULAR PRESENTATION OF DATA COLLECTED
Respondents Yes No Total
Top managers 16 70 86
MiddleManagers
66 14 80
Employees 39 11 50
TOTAL 121 95 216
Percentage 56% 44% 100%
Source: Field Survey, 2012.
The above indicates that 121 (representing 56%)
out of total number of 216 respondents submitted that
cost and management accounting techniques help in
production processes. Whereas, 95
(representing 44%) out of the 216 respondents
maintained cost and management accounting
techniques do not help in
production processes.
54
Question 7: Does cost and management accounting
help in planning, controlling and decision making in
Benue Brewery Limited?
54
PRESENTATION OF DATA COLLECTED.
Respondents Yes No TotalTop managers 38 48 86MiddleManagers
70 10 80
Employees 46 4 50Total 154 62 216Percentage 71% 29% 100%Source; Field Survey, 2012.
The table above shows that out of a total of 216
respondents, 154 (representing 71%) submitted that
cost and management accounting help in planning,
controlling and decision making in Benue Brewery
Limited. However, 62 respondents (29%) rejected,
submitting that cost and management accounting does
not help in planning, controlling and decision making
in Benue Brewery Limited.
Question 8: Are desirable conditions used for
designing cost and management accounting system in
Benue Brewery Ltd? Consider again the table below:
55
TABLE 4: PRESENTATION OF DATA COLLECTED
Respondents Yes No Total
Top Managers 36 50 86
MiddleManagers
70 10 80
Employees 43 7 50
Total 149 67 216
Percentage 69% 31% 100%
Source: fieldsurvey, 2012
The above shows that 149
(representing 69%) out of
the 216 respondents saw that
desirable conditions are used for designing cost and
management accounting system in Benue Brewery Ltd.
The remaining respondents (67) submitted that
desirable conditions are not used for designing cost
and management accounting system in Benue Brewery
Ltd.
Question 9: Do power, raw material, and
56
technology hinder the effective use of cost and
management accounting techniques in Benue Brewery
Limited?
56
TABLE 5: PRESENTATION OF DATA COLLECTED
Respondents Yes No Total
Top Managers 39 47 86
MiddleManagers
71 9 80
Employees 45 5 50
Total 155 61 216%
Percentage 72% 28% 100%
Source: field survey, 2012.
The table above shows that 155 respondents
(representing 72%) out of the 216 respondents
submitted that power, raw material, technology hinder
the effective use of cost and management accounting
techniques in Benue Brewery Limited.61
respondents (i.e 28%) disagreed,
holding that power, raw material, technology do not
hinder the effective use of cost and management
accounting techniques in Benue Brewery Limited .
Question 10: Does production affects the profit of thecompany?
TABLE 6: PRESENTATION OF DATA COLLECTED.
57
Respondent Yes No Total
Top Managers 61 25 86
MiddleManagers
16 64 80
Employees 42 8 50
Total 119 97 216
Percentage 55% 45% 100%
Source: Field Survey, 2012.
Table 6 shows that 119 respondents (equivalent
to 55%) out of the 216 respondents submitted that
production affect the profit of the company. On the
other hand, 97 respondents (representing 45%) held
that production does not affect the profit of the
company.
4.3 Testing of hypotheses.
It was established in chapter three (3) that
hypothesis will be tested at 5% error tolerance
The decision rule still remains that the
TABLE 6: PRESENTATION OF DATA COLLECTED.
58
null hypothesis will be accepted if calculated chi-
square (x2) is less than the chi-square tabulated,
otherwise it be rejected.
Tabulated value of chi-square:
59
DF=(R-1)(C-1)
= (2-1) (3-1) =2
From the chi- square distribution table, the value
of chi square under DF2 and 5% tolerance error is
5.99.This figure will henceforth be marched with the
calculated values of chi-square on each hypothesis to
ascertain its acceptability or otherwise.
HYPOTHESIS ONE(1)
Ho1: manufacturing companies do not use the
desirable condition before designing and installing
a cost and management accounting technique.
Ha1: Manufacturing companies use the desirable condition
before designing and installing a cost and management
Tabulated value of chi-square:
60
accounting technique.
Related question from the questionnaire
(question8): Are desirable conditions
used for designing cost and management
accounting system in Benue Brewery Ltd? Consideragain the table
61
below:
Table 7: Table of Responses
Respondent Yes No Total
TopManagers
36 50 86
MiddleManagers
70 10 80
Employees 43 7 50
Total 149 67 216
Percentage 69% 31% 100%
From the above table, expected values may be calculated thus;
Row/Column R ow Tot a l X C ol u mn Tot a l
1, 1
Ground total
1 4 9 x 8 6 21
= 59
1, 2 (149 x 80) ÷
216 = 551, 3 (149 x
50) ÷216 = 35
2, 1 (67 x 86) ÷
216 = 272, 2 (67 x
80) ÷216 = 25
2, 3 (67 x 50) ÷
216 = 16
Table 8: ContingencyTable
60
Row/Column O E O-E (O-E)2 (O-E) 2
1, 1 36 59 23 529 91, 2 70 55 15 225 41, 3 43 35 8 64 22, 1 50 27 23 529 202, 2 10 25 -15 225 92,3 7 16 9 81 5
X2 = 49
Since the calculated chi-square (x2c) is greater than the chi-square
(x2t), that is, 49>4.99, the nullhypothesis will be rejected.
HYPOTHESIS TWO (2)
Ho2: The cost and management accounting techniques
designed for Benue Brewery Limited do not
assist managementin planning, controlling and
decision making.
Ha2: The cost and management accounting
technique designed for Benue Brewery Limited assist
management in planning, controlling and decision
making.
1, 1 (154x86) ÷ 216
= 611, 2 (154x80) ÷
216= 5
71, 3 (154x50) ÷ 216
= 362, 1 (62 x 86) ÷
216= 2
52,2 (62 x 80) ÷216
= 232,3 (62 x 50) ÷
216= 1
4
61
Related question from the questionnaire (question
7): Does cost and management accounting help in
planning, controlling and decision making in Benue
Brewery Limited?
Table 9: Table of Responses
Respondents Yes No TotalTop managers 38 48 86MiddleManagers
70 10 80
Employees 46 4 50Total 154 62 216Percentage 71% 29% 100%Source: Table 9Calculation of expected values (expected frequencies)
Row/Column R ow Tot a l X C ol u mn Tot a l Groundtotal
Table 10: ContingencyTable
62
Row/Column O E O-E (O-E)2 (O-E) 2
1, 1 38 61 -23 529 91, 2 70 57 13 169 31, 3 46 36 10 100 32, 1 48 25 23 529 212, 2 10 23 -13 169 72,3 4 14 -10 100 7
50
Since the calculated chi-square (x2) is greater than the x2 tabulated,
the null hypothesis will be rejected.
H Y PO T H E S I S T H RE E ( 3 ):
Ho3: Power, raw material, technology do not hinder theeffective use of
cost and management techniques in Benue Brewery Limited.
Ha1: power, raw material, technology hinders the
effective use of cost and management accounting
techniques in Benue Brewery Limited.
Related question from the Questionnaire(question 9):
63
Do power, raw material, technology hinder the effective use of cost and
management accounting techniques in Benue Brewery Limited?
Respondents Yes No Total
Top Managers 39 47 86
Middle
Managers
71 9 80
Employees 45 5 50
Total 193 23 216
Percentage 89% 11% 100%
Calculation of Expected Values (EV)
1, 1 (117 x 86) ÷ 216 = 47
1, 2 (117 x 80) ÷ 216 = 43
1, 3 (117 x 50) ÷ 216= 27
2, 1 (97 x 86) ÷ 216 = 39
Related question from the Questionnaire(question 9):
64
2, 2 (97 x 80) ÷ 216 = 36
2,3
(97 x 50) ÷ 216
= 23
65
Row/Column O E O.E (O-E)2 (O-E) 2
1, 1 61 47 14 196 41, 2 16 43 -27 729 171, 3 42 27 15 225 82, 1 25 39 -14 196 52, 2 64 36 28 784 222,3 8 23 -5 225 10
X2c = 66
From the contingency table above, the chi-square (x2) is 66. This is
greater than the tabulated chi-square (x2) which is
5.99. Therefore, the null hypothesis is rejected.
4.4 Interpretation Of Results
The results obtained from testing the
hypotheses are quite revealing as briefly elaborated
hereunder.
In testing hypothesis one (1), the null
hypothesis, which states that manufacturing companies
do not use the desirable condition before designing
2,3
(97 x 50) ÷ 216
= 23
66
and installing a cost and management accounting
technique was rejected. This implies that
manufacturing companies actually use
the desirable conditions before designing and installing a cost and
67
management accounting technique. Hence, thealternative hypothesis
which states that manufacturing companies use the
desirable condition before designing and installing a
cost and management accounting technique has been
accepted.
Similarly, in the second hypothesis, the null
hypothesis, which states that cost and management
accounting techniques designed for Benue Brewery
Limited do notassist management in
planning, controlling and decision making, has
been debunked. This portends the fact that cost and
management accounting techniques are essential tools
for planning, controlling and managerial decision
making, a position which goes in tandem with the
alternative hypothesis.
Finally, the result in testing hypothesis three
the desirable conditions before designing and installing a cost and
68
(3) has it that Power, raw material, technology do
hinder the effective use of cost and management
techniques in Benue Brewery Limited. To this wise,
the null hypothesis, which states that power, raw
material, technology do
not hinder the effective use of cost and management techniques in
69
Benue Brewery Limited has been rejected.
CHAPTER FIVE
70
SUMMARY, CONCLUSIONS AND RECOMMMENDATIONS
5.1 Introduction:
In this concluding chapter, we shall
discuss the research findings and make
recommendations to the company (Benue Brewery
limited). Finally, we shall draw conclusions and make
suggestions for further studies by interested
persons.
5.2 Summary of findings
The main data sources for this research are
company records and questionnaires. The data gathered
by using company records enabled us to compare with
the system of costing in operation at Benue Brewery
Limited. The data gathered by using
questionnaires administered to the staff of
CHAPTER FIVE
71
the company enabled us to have insight of the costing
system used by the company. After the comparison, we
discovered that the company is operating process
costing system which is the right costing system.
Although process costing is suitable for the company taken into
72
consideration the mode of operation, processcosting has not been
satisfactorily followed. The following observations
were made during the study. The cost of goods sold to
the customers is not based on the costing
records but purely on the prices list which
management review from time to time.
It is also important to note that the price the
company is selling her product is much lower than the
actual cost of production based on the production
report.
Benue Breweries does not maintain stock level
by using reorder level, minimum stock level and
maximum stock level. However the company carries out
weekly stock summary.
The method of material costing used by the
Although process costing is suitable for the company taken into
73
company is first-in- first-out. The company keeps
attendance register for their staff on a daily
basis. Also the company maintains a constant
check on the
number and types of its employees are generally paid on a monthly
74
basis.
Breweries Limited recognized expensesas being either
common to more than one cost centre like electricity
and water or just one.The company also
recognized three overheadsnamely
administration overheads, production
overheads and marketing overheads. The
company considers all losses as normal and their cost
is borne by the good production.
The company calculates its unit costs on a
monthly basis. at the end of the month, the cost of
material and labour for all the processes is added
together to determine the total cost. All costs
incurred during the month are divided by the number
of units produced during the month.
number and types of its employees are generally paid on a monthly
75
It is more economical for Benue Breweries
limited to produce larger beer. This is because they
always of high demand by the customers there
constitute a higher percentage of sales mix and sales
prices.
5.3 Generalization of findings
70
The main purpose of a costing system is to analyze and allocate
the expenditure of a business in such a way that is
possible to ascertain the cost of each job, contract,
or process carried out, but this is by no means its
sole function. A well established
costing system will discharge functions like
providing management making and in forward planning.
A properly established and implemented costing
system also helps management to distinguish
between economic and uneconomicactivities
include sources of wastages, provides
information in order to facilitate comparisons with
estimates provides a basis for the preparation of
estimates and fixing of selling price and
revealing the cause of increase or decrease in the
profit shown by the management accounts.
5.3 Generalization of findings
71
This is particularly important if the business
is to service and also its short and long term
objectives. To achieve this aim, the Benue Brewery
Limited established process costing. Process costing
is suitable
for the company mode of production; these areweaknesses in the
72
implementation of the system. This is because of thefollowing reasons:
1. The material control system is not efficient, this
is because the company does not determine stock level
of its raw materials
2. The method of calculating the cost of processing
is not desirable since the company does trace its
neither profitability nor losses to their sources.
3. Price of the product is fixed arbitrarily without
making reference to the costing statement resulting
in selling below cost prices.
4. The company does not usestandardcosting techniques which
compares the “ standard cost ” of each product or
services which the actual cost determines the
inefficiency of the operation so that remedial
attention may be taken immediately.
for the company mode of production; these areweaknesses in the
73
5. The company does not use
marginalcosting techniques which differentiate
variable from fixed cost that helps to determine as
to whether producing an additional unit cost are
directly responsible for
the output and the excess needed to cover both fixed and overheads
74
costs of units produced and the expected profit.
6. The company makes budget which are on intuition. The
major problem this has caused is the company produces
more than it can sell resulting in overstocking of
finished products.
7. The company is not making much profit. This is
primarily because the selling price of her products
is even lower than the cost of production. This is
due to the fact that the company has to tie price in
order to compete with other breweries.
5.4 Recommendations
The essence of process costing is the help in
classification, recording and appropriate allocation
of expenditure for determination of the cost of
individual units produced .The cost is then related
to sales values management in decision making.
the output and the excess needed to cover both fixed and overheads
75
Therefore, based on the weaknesses enumerated in
evaluation of findings, the following are
recommended in order to strengthen the costing
system in use so that
management can derive all possible benefitsfrom implementing
76
process costing system.
1. The company should determine stock level by using
mathematical or statistic method in setting stock
level, maximum stock level and minimum stock level in
selling out these stock levels, the following factors
must be taken into consideration:
a. The rate of consumption of the materials.
b. The time necessary to obtain delivery of
the raw materials. c. The re-order quantity
for the material :
The formula are
Max C=maximum consumption during the period
Max R.P = maximum re-order period.
It should be noted that in re-fixing the re-order
level, the worst possible expected condition are
used.
management can derive all possible benefitsfrom implementing
77
2. The price of the product of the company should
based on the costing statement and not arbitrary.
78
3. The company should trace the profit and losses to their sources.
4. The company should introduce standard costing
techniques: this will help to determine inefficiency
of the operation so that remedial action may be taken
immediately.
5. The company should introduce marginal costing
techniques: this will enable the company to
determine which is directly responsible for output
and the additional unit needed to produce at expected
profit.
5.5 Recommendation for further studies.
1. More work can be carried out on method of fixing
the stock level using mathematical or statistical
method.
2. Also more work can be carried out to establish the breakeven point for
Benue brewery limited.
79
5.6 Limitation of the Study
Many constraints sufficed in the course of
carrying out this study among which were those
relating to finance, time inability to get certain
data which were not available or considered official
secret by the company.
75
The company busy schedule due to the nature of their
job requirement made it difficult for me to get
access to the respondents staff and timely
administration and collection of questionnaire.
76
REFERENCES
Abarry (1986) Understanding Research, LongEssay and Thesis
Writing. Nigeria . Unijos press limited.
Aver J.J (1959). An Introduction to Research. Newyork. Harper and
Row.
Azende T. (2011) Basic Statistics andQuantitative Techniques .
Makurdi. Aboki publishers.
Batty S (1974) Advanced Cost Accounting. London Maacdonald and
Evans ltd.
Bhattachagg et al (1980) Accounting for Management. New Delhi, vikas
Publishing House ltd.
Carter J. C (1983) Cost Control. New Jersey Prentice Hall.
Dupree D. (1978) Principles of Accounting. London, Matthew Mardor
Erhirhie wud (1989) Unpublished Lecture Manual, Unijos.
77
Hornegren C.T. et al(1990) Cost and Management Accounting, a
Managerial Emphasis. New Delhi. Prentice Hall.
John C.T et al (1990) Cost Accounting a Managerial Emphasis. New
Delhi Prentice Hall.
77
Keerlinger F.N (1973) Foundations of Behavioural
Research . London, Holt kinchart and winiston.
Kneth G (1974) Breakthrough ,PracticalCost and Management
Accounting .Newyork Macgrew-hall.
Lynch R.M (1967) Accounting for Management Planning and Control.
Newyork Winthrop production.
Nachmias C et al (1967) Research Methods in the Social Science .London
St Martin Press Inc.
Tsegba I.N (2011) Unpublished Lecture Manual, BSU.
Ndagi J. O (1984) Essentials of Research Methodology for Nigeria
Education. Ibadan University Press ltd.
Vickery B.G (1971) Principles and Practice of Bookkeeping and
Accounts London, Cassel.
Nachmias C et al (1967) Research Methods in the Social Science .London
St Martin Press InC
Whitehead G et al (1986) Success in
78
Accounting and Costing
London.John Murray Publishers.
Walpole R.T (1980) Introduction to Statistics. Newyork Macmillan
Publishers.
APPENDIX I
79
Department of Accounting,
Benue State
University,
Makurdi.
Dear Sir/Madam,
I am an undergraduate student from Benue State
University, Makurdi. As part of the requirementsfor the award of Bachelor of Science degree (B.Sc.)
Accounting, I am therefore carrying a research on theappraisal of the application of cost and management
accounting techniques in Nigerian manufacturingcompanies: A case study of Benue Brewery Limited.
It will therefore be appreciated if you wouldkindly complete this questionnaire. Please be assured
that the information so requested will be used bothin confidence and solely for academic purpose.
Thanks for your anticipated cooperation.
APPENDIX II
80
QUESTIONNAIRES
SECTION A: PERSONAL DATA
1. Sex (a) Male[ ] (b) Female [ ]
2. Marital status (a) [ ] Married b Single[ ]
3. Age group (a) 15-20[ ] (b) 21-40 [ ] (c) 40 and above[ ]
4. Qualification (a) GCE/ WAEC[ ] ( B) NCE
[ ] ( c) ND/HND [ ]
(d) Others(specify) [ ]
5. Department (a) Production [ ] (b) Finance[ ] ( c) Marketing [ ] (d)
Engineering [ ]
6. Do cost and management techniques help in
production process? (a) Yes [ ] (b) No [ ]
7. Does cost and management accounting help in
planning, controlling and decision making in Benue
Brewery Limited? (a)Yes [ ] b [ ]
APPENDIX II
81
8. Are desirable conditions used for designing
cost and management accounting system in Benue
Brewery Ltd (a) Yes [ ] (b) No[ ]
9. Do power, raw material, technology hinder the effective use of cost and
80
management accounting techniques in Benue Brewery Limited?
10.Does production affect the profit of the company? (a) Yes [ ] (b) No [
11.Doesthe company produce more than one productand
other specification? (a) Yes [ ] (b) No [ ]
