ABSTRACT
The study examined the effectiveness of cost accounting as a panacea for performance evaluation in manufacturing companies. The data used in the study was obtained from primary sources. The collection of primary data was done through the administration of questionnaire on respondents who are staff of manufacturing firms in Lagos State Nigeria. A questionnaire was designed and administered to 46 respondents from a population of 455 in which the completed ones were returned and used in the completion of this study. Taro Yamane’s formula was used in determining the sample size. The data collected were analyzed with the use of Statistical Package for Social Sciences (SPSS). Results showed that there is significant relationship between direct material and performance of manufacturing companies, there is significant relationship between direct labour and performance of manufacturing companies, overhead cost has significant effect on the performance of manufacturing companies and Cost accounting has significant effect on the performance of manufacturing companies in Nigeria. Consequently, the study concluded that cost accounting is a very efficient and effective panacea for performance evaluation in manufacturing companies. However, to prepare a good and workable costing technique, establishments must know its goals and objectives, as well as where it is heading to. Nevertheless, cost accounting control is a managerial tool and not a substitute for management.
TABLE
OF CONTENTS
TITLE PAGE - - - - - - - ii
DECLARATION - - - - - - - - iii
CERTIFICATION - - - - - - - - iv
DEDICATION - - - - - - - - v
ACKNOWLEDGEMENTS - - - - - - vi
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
1.2 Statement of the Problem
1.3 Objectives of the Study
1.4 Research Questions
1.5 Hypothesis
1.6 Significance of the Study
1.7 Scope/Limitations of the Study
1.8 Definition of Terms
CHAPTER
TWO
LITERATURE
REVIEW
2.1
Introduction
2.2 Theories
of Cost and management accounting
2.2.1 Contingency
Theory of Cost and management accounting
2.2.2
New
Institutional Sociology
2.3 Determinants
of financial performance in manufacturing firms
2.4 Empirical
Studies
2.5
Summary
of literature review
CHAPTER
THREE
RESEARCH
METHODOLOGY
3.1 Introduction
3.2 Research
Design
3.3 Population
3.4 Sample
Design
3.5 Data
Collection
3.6 Data
Analysis
3.7 Empirical
model
CHAPTER
FOUR
DATA
ANALYSIS, RESULTS AND INTERPRETATION
4.0 Introduction
4.1 General
Information
4.1.2 Current
Number of Employees in the Respondents Company
4.2
Cost
and management accounting Practices
4.2.1 Usage
of Costing Cost and management accounting Practices in Respondents Company
4.2.2 Usage
of Budgeting Management
Accounting Practices in
Respondents Company
4.2.3 Usage
of Performance Evaluation
Management Accounting Practices
in Respondents
Company
4.2.4 Usage
of Information for Decision Making Cost and management accounting Practices in
Respondents Company
4.2.5 Usage of
Strategic Analysis Cost and management accounting Practices in Respondents
Company
4.3 Respondents
Opinion on the Importance of Cost and management accounting Practices
4.4 Inferential
Statistics
4.4.1 Regression
Analysis
4.5 Summary
and Interpretation of Findings
CHAPTER
FIVE
SUMMARY,
CONCLUSION AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusions
of the study
5.3 Recommendations
for Policy and Practice
5.4 Limitations
of the Study
5.5 Suggestions
for Further Research
References
Appendix: Research Questionnaire
LIST
OF TABLES
Table 4.1: Usage
of Costing Cost and management accounting Practices in Respondents Company
Table 4.2: Usage
of Budgeting Cost and management accounting Practices in Respondents Company
Table 4.3: Usage
of Performance Evaluation Cost and management accounting Practices in
Respondents Company
Table 4.4: Usage
of Information for Decision Making Cost and management accounting Practices in
Respondents Company
Table 4.5: Usage
of Strategic Analysis Cost and management accounting Practices in Respondents
Company
Table 4.6 Importance
of cost and management accounting practices
Table 4.7: Model
Summary
Table 4.8: ANOVA
Table 4.9: Coefficients
LIST
OF FIGURE
Figure 4.1. Respondents Company Specialty
Figure 4.2: Current Number of Employees in the
Respondents Company
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Cost accounting (CA), which measures and reports
financial and non-financial information related to the organization’s
acquisition or consumption of resources, has an exceptionally important
position within the entire accounting information system of an organization
because it provides information to both management accounting and financial
accounting as subsystems of the accounting information system. When its
information is intended for the financial accounting it measures product costs
in compliance with the strict legal and professional regulations. When its
information is used for internal purposes it provides the basis for planning,
control, and decision-making. Accounting data used for external reporting very
often do not completely satisfy managers‟ needs for decision-making purposes.
Attempts at slight modifications of financial accounting systems for managerial
purposes rarely end happily and far from effective (Wikipedia, 2015).
According to the Institute of Management Accountants
(IMA): "Management accounting is a profession that involves partnering in
management decision making, devising planning and performance management
systems, and providing expertise in financial reporting and control to assist
management in the formulation and implementation of an organization's
strategy".
The
primary focus of economic planning and management in Nigeria over the years has
been the transformation of the economy through industrialization, however,
desired results are yet to be obtained. The Nigerian economy is far from being
fully industrialized and the manufacturing sector is yet to take a prominent
place in the scheme of things (Ayodele & Falokun, 2003). The country has
not been able to shift its export base, from crude oil and agriculture to
manufactures. Up to date, on the average, the manufacturing sector’s
contribution to gross domestic product (GDP) has been unimpressive ranging
between 3 to 6percent since the turn of the millennium. For instance,
manufacturing contribution to GDP declined from about 6% in 2000 to 3.91% in
2006 and between 4.03% and 4.17% from 2007to 2010 (National Bureau of
Statistics 2011). The need to increase company level efficiency has been a
dominant suggestion offered as the key to reversing this unimpressive
performance. As Soderbom and Teal (2002) suggested, a key policy issue the
Nigerian government should face is to understand and address the factors that
will enable the efficiencies of companies and consequently their
competitiveness to increase. Ayodele and Falokun (2003) also suggested the
adoption of the combination of suitable management techniques with suitable
technology and other resources in addressing the low productivity of the
sector.
Cost
accounting and management accounting has been suggested as one of such
important management techniques that can help ensure efficiency in the use of
companies’ resources (IFAC, 1998).Traditionally, the main objective of the cost
accounting and management accounting systems has been to provide information
for costing products and for promoting efficiency in the use of labour and
materials (Johnson & Kaplan, 1987). Such traditional method adopt practices
and techniques such as standard costing and flexible budgeting for cost
control, cost allocation and product cost measurements; incremental analysis
for decision-making; measurement of profit, contribution and return on
investments for performance monitoring; and the full integration of internal
cost accumulation systems with the external financial reporting systems
(Shillinglaw, 1989).
Company
performance is the net result of the combined efforts of all individuals and
groups in an organization (Khandwalla, 1977). Companies referred to in this
study are the manufacturing companies. The definition of company performance is
problematic because it varies, depending on the viewpoint from which it is
being assessed. For example, from society’s viewpoint, performance may be
assessed in terms of efficiency of production of products or services needed by
the society. From the owners’ viewpoint, profitability and growth rate in
earnings may be the criteria, while employees may assess performance from how
well employees are being treated. Customers may look at product quality, prompt
delivery and competitive pricing. Since management must take into account the
various expectations of these groups in setting its goals, management’s
criteria for assessing company performance may be assumed to adequately reflect
the concerns of others groups such as the society, employees, suppliers and
customers (Khandwalla, 1977). However, the researcher is examining the effect
of use of cost accounting and management accounting as a tool for performance
evaluation in manufacturing company.
1.2 STATEMENT OF THE PROBLEM
Even though
a cost accounting and management accounting system is supposed to assure that
manufacturing work is done according to the company strategy, this has not been
the reality in many companies. It has been known for many decades that
management and production systems used in manufacturing have not developed in
harmony. This misalignment is a reason for why unfavourable decisions are
encouraged in manufacturing (Skinner, 1971; Kaplan, 1984).
When reviewing publications regarding cost accounting
and management accounting systems, it is obvious that the interest in the topic
has grown in recent years. However, the researcher will provide an overview of
cost accounting and management accounting as a tool for performance evaluation
in manufacturing company.
1.3 OBJECTIVES OF THE STUDY
The general objective of this study is to analyze cost
accounting and management accounting as a tool for performance evaluation in
manufacturing company. However, the following are the specific objectives:
1.
To find out if cost
accounting can be a tool for performance evaluation in manufacturing company
2.
To find out if management
accounting can be a tool for performance evaluation in manufacturing company
3.
To examine the effect of
cost accounting and management accounting on manufacturing company performance.
1.4 RESEARCH QUESTIONS
1.
Can cost accounting be
used as a tool for performance evaluation in manufacturing company?
2.
Can management accounting
be used as a tool for performance evaluation in manufacturing company?
3.
What is the effect of
cost accounting and management accounting on manufacturing company performance?
1.5 HYPOTHESIS
HO: Cost accounting and management
accounting cannot be used as a tool for performance evaluation in manufacturing
company
HA: Cost accounting and management
accounting can be used as a tool for performance evaluation in manufacturing
company
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
1.
It will be a guide for
manufacturing companies basically on how cost accounting and management can be
used as a tool for performance evaluation. It will also educate stakeholders in
the manufacturing sector on how cost accounting and management accounting can
be sued to boost productivity and profitability.
2.
This research will also
serve as a resource base to other scholars and researchers interested in
carrying out further research in this field subsequently, if applied, it will
go to an extent to provide new explanation to the topic.
1.7 SCOPE/LIMITATIONS OF THE STUDY
The scope of this study on cost accounting and
management accounting as a tool for performance evaluation in manufacturing
company will cover all the manufacturing companies in Lagos State by carefully
examining their respective performance evaluation tools.
LIMITATION OF
STUDY
Financial constraint-
Insufficient fund tends to impede the efficiency of the researcher in sourcing
for the relevant materials, literature or information and in the process of
data collection (internet, questionnaire and interview).
Time constraint-
The researcher will simultaneously engage in this study with other academic
work. This consequently will cut down on the time devoted for the research
work.
1.8 DEFINITION OF TERMS
Management accounting: is the part of the
management process that is focused on adding value to organizations by
attaining the effective use of resources in dynamic and competitive contexts
(Sharman, 2003). Management accounting consists of both cost accounting and
performance measurement. It contains all the information which is officially
gathered to support the decision making in production. It is used for internal
purposes and therefore different from financial accounting which is used for
reporting for external stakeholders.
Cost accounting: is the process of
accumulating and accounting for the flows of costs in a business. It is defined
as a technique or method for determining the cost of a project, process, or
thing through direct measurement, arbitrary assignment, or systematic and
rational allocation. The appropriate method of determining cost often depends
on the circumstances that generate the need for information (Swamidass, 2000).
This can be information such as material cost, production cost, product cost,
investment calculations, and budget.
Performance measurement: is the process of
quantifying actions, where measurement is the process of quantification and
performance is the result of action (Slack, 1997). These measurements show how
well the production is performing in categories such as quality, delivery
precision, service level, time per operation, set up time and so on.
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