THE ROLE OF MANAGEMENT ACCOUNTANT TO COST CONTROL AND PROFIT PERFORMANCE IN AN ORGANIZATION (A CASE STUDY OF INNOSON NIGERIA LIMITED ENUGU)
Accountants have been bestowed with the role of providing information to the management regarding the affairs of the organization in particular and to the stakeholders in general. Internally, in manufacturing organization, management has always relied on the management accountant for cost evaluation and performance efficiencies of cost element. This role of management accountant to the management has been in doubt because of incessant increase in the cost elements of goods manufactured in Nigeria which in cause has resulted in constant increase in the price of goods. The aim of this research study is to evaluate the role of management accountant to cost control and profit performance in an organization. a quasi-experimental research design was adopted for this research study and the sample size was selected using the Taro Yamane sampling technique. Primary and secondary sources of data were used in collecting information which was analyzed using simple percentages. The hypothesis was tested using chi- square statistical method at 0.05 level of significance for validity and decision making. The findings from the analysis of the research study depicts that organizational strategic managers should rely on management accountant information for decision making. Management of any manufacturing company cannot make profitable decision without quality information. The researcher can confidently conclude based on the findings that the availability of skilled, knowledgeable and informative management accountant in an organizational profit performance promotes productivity. Therefore, this research work recommends that management accountants should provide information on time so as to hasten up in making vital decision because undue delay in decision making will definitely undermine the firms‟ goal of profit maximization. Also, it recommends that adequate exposure should be given to management accountants through training programmes, appraisal and evaluation of seminars in order to acquaint them with the new technologies in vogue and keep pace with new knowledge.
TABLE OF CONTENTS
Title page i
Certification Page ii
Table of contents vi
CHAPTER ONE: INTRODUCTION
1.1 Background of the study 1
1.2 Statement of the study 2
1.3 Objectives of the study 3
1.4 Research Question 4
1.5 Formulation of hypotheses 4
1.6 Significance of the study 5
1.7 Scope of the study 6
1.8 Limitations of the study 6
1.9 Definition of terms 7
2.1 Definition of profit performance. 9
2.2 The concept of profit performance. 10
2.3 Functions of Management Accountants in relation to profit making in an organization. 12
2.4 Basic tools employed by Management Accountants in
Profit maximization. 14
2.41 Standard Costing 14
2.42 Marginal Costing 20
2.43 Budgeting and Variance analysis 22
2.44 Cost Volume Profit Analysis 28
2.5 The Concept of Cost in Profit Maximization 29
2.6 Ways of Regulating Cost in a Manufacturing Company. 31
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design 36
3.2 Sources of Data 37
3.3 Area of study 38
3.4 Population of Study 38
3.5 Determination of Sample Size 38
3.6 Reliability Test 40
3.7 Validity Test 41
3.8 Method of Data Analysis 41
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1 Presentation of Data 43
4.2 Analysis of Data 43
4.3 Testing of Hypotheses 60
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS.
5.1 Introduction 67
5.2 Summary of findings 67
5.3 conclusion 69
5.4 Recommendations 70
1.1 BACKGROUND OF THE STUDY
Prices of goods and services are gradually increasing day by day, and due to the fact that the sole aim of a businessman, producer or manufacturer is to make profit they end up making use of low quality materials for production so as to reduce cost of production and maximize profit. Moreover, with the increase of competitors around, most of the producers have thought it wise to manufacture or package a quality product and also enhance their profit level. This elevated the interest of the researcher to bring to light of how this goal can be achieved through intensive study of the role of management accountants to cost control and profit performance in an organization. Apart from cooperate scandals; there has been anosmatic pressure for better profit maximization as the business environment became more volatile, prices of products increasing at an alarming rate, and the production of low quality products.
In the past management accountants operation is strictly on workers capacity usually separated from the managers for whom they provided reports and information. But in this present period, management accountant now serve as internal business consultants. Working together in cross functional teams with managers from all sectors of the organization.
However, the management face a broad array of decisions including production, marketing, financial and other relevant decisions. Also having in mind that decision making is a fundamental part of management; the management accountant must be equipped with some knowledge of accounts and management. He must have an understanding and knowledge of the environment and the operations of the organization in which those systems are implemented and appropriate technology to apply in each case for the provision of management information. It is obvious that the management of a manufacturing firm will need information that will enable them consider the factors affecting cost of production, cost reduction, product pricing and investment etc, so as to choose the best alternative.
1.2 STATEMENT OF THE PROBLEM
In recent years, the cost of products manufactured in Nigeria has been very expensive beyond the reach of common Nigerians. This cost challenges has made many products manufactured in the country unpatronized by the consumers, and as a result of that expires in the hands of the sellers. There is also a problem of poor inventory management which leads to overstocking thereby tying down the company‟s working capital. Another problem facing some or most of the manufacturing firm is the installation of improper plan to reduce cost of production so as to maximize profit, i.e. ( making use of low quality raw material).
Management accountants are assigned with managing cost elements of products among other responsibilities. He aligns cost with efficiency; provide required information for cost minimization so that profit could be maximized. These assignments should reduce product pricing, but instead there have been a consistent product price racketing. These problems therefore brought the need for this research work which intends to find the reason for this persistent increase in product pricing where the services of management accountants were engaged and therefore putting up the following questions:
Do management accountants perform in their responsibility?
Is cost performance inefficiencies of management accountants included in the product pricing?
Is the recent in price caused by other factors rather than elements of cost of production managed by management accountants?
How would the role of management accountant in an organization improve profit performance?
1.3 OBJECTIVES OF THE STUDY
1 To determine the relevance of management accountant in an organizational internal cost performance efficiency.
2 to ascertain whether the resent increase in cost of products manufactured in Nigeria is caused by other factors rather than management inefficiency.
3 To ascertain if organizational strategic managers should rely on management accountant information for decision making.
4 To make recommendations based on the findings.
1.4 RESEARCH QUESTIONS
To what extent is management accountant still relevant in organizational internal cost performance efficiency?
Does the resent increase in cost of products manufactured in Nigeria caused by other factors rather than management accountant inefficiency?
To what extent should strategic managers rely on management accountant information for decision making?
1.5 FORMULATION OF HYPOTHESIS
The following hypothesis was formulated for this research work.
H0: management accountant is not relevant in organizational internal cost performance efficiency
H1: management accountant is relevant in organizational internal cost performance efficiency.
H0: resent increase in cost of products manufactured in Nigeria is not caused by other factors rather than management accountant inefficiency.
H1: resent increase in cost of products manufactured in Nigeria is caused by other factor rather than management accountant inefficiency.