TABLE OF CONTENTS
Table of contents
Background of the study
Statement of research problems
Objective of the study
Significance of the study
Scope of the study
Limitations of the study
Definition of key terms
TWO: Literature Review
Decision making in management
Cost – volume – profit (break – even)
Limitations of the model
Decision under certainty, uncertainty and
Role of decision model
THREE Research Methodology
Historical profile of the case study
Method of data collection
Population and sample size
presentation and analysis
Discussion of the analysis
Discussion of finding
Conclusion and Recommendation
OF THE STUDY
The accounting system is the major
quantitative information acquired in almost every organisation and it therefore
provide information for three broad purposes namely: internal reporting to
managers for use, in planning and controlling routine operation and non-routine
operations. Formulation of major plans and policies and finally external
reporting to stockholder, government, debenture holder and other outsides
depends largely on quality and quantity of data received. Thus, information
flows on the management information system influence the effectiveness of
decision – making.
“HORNGEN” the question of what accounting system to business most focus on how
decision and consequent benefits are going to be affected. One must ask what
decision will result from accounting data and what outcome will ensure from
continually work with accounting system and financial reports, which are
financial model of company operations. Models are useful because they provide a
conceptual representation of realities, enabling the decision maker to
anticipate and measure the effect of alternative actions.
Decision- making is choosing among
alternatives, it occurs as managers perform their planning and controlling
function. A decision model is one, which, in effect performed by management
planning and controlling function, but only extent that management delegates,
when the model was constructed and implemented.
In most organisation, the accountant is the
quantitative expert, and to retain and improve his status, the accountant
should be aware of the mathematical models may improve planning and control.
And also strength and weakness, when comparing and evaluating the quantitative
sources of decision recommendation, as the accountant is usually a member of
the top management team in these organisation.
According to “Thieraof” generally a model is defined as a representation of an
actual object or situation. A formal decision model measures the predicted
effect of alternative actions.
However, it is pertinent to note that
according to the report of the committee on management decision models, a
mathematical decision model may indicate a choice which is rejected by
management because of more dominant legal, sociological, psychological, political
and other consideration not include in the specific. In such instances, the
output of the mathematical model is only one input into a more completed
decision model, which includes qualitative as well as quantitative dimension.
1.2 STATEMENT OF RESEARCH PROBLEMS
over the years glad seen cost accounting model as a tools for managerial
decision making which results to modern accounting system that have been
effective and efficient.
accounting has been described as the tools that facilitates the measures which
predict the effects of attentive actions and yet, the management has not base
their decisions making on the effects predicted over the alternative action.
qualified cost accountant has not been fully employed for them to show their
skills in the field and this has led to bad effects in the running of the
researchers also discourage the up-coming cost accountant by collating,
analysizing and distributing wrong data to them thereby disqualifying them from
gaining employment in regards to this field.
1.3 OBJECTIVE OF THE STUDY
are other various sources of information for management decision-making, cost
accounting models in particular and ensure cost control.
accounting renders useful information to decision making for proper planning
evaluation and control. Some of the information rendered comprises:- forcasting
of product costs of an order, budget preparation, determination of standard
cost and analysis of variances, budget preparation, determination of standard
cost and for proper cost identification. The major objectives of cost
control and cost reduction programme in such a way as obtain efficiency of
breakeven point, cost – volume profit relationship, marginal cost etc.
profitability for each product or for each segment.
personnel in decision making process.
and codification for the purpose of easy identification.
of the study
Any decision maker should have at his disposal, the best
qualitative and quantitative tools which are available, so that he may
establish a frame of reference for the decisions. Past literature on the
research have been too general without giving special consideration to the
bottling company and in fact, have been too theoretical.
is therefore intended for use by managers and accountancy especially in the
bottling industry in implementation of decision – making task in a more
efficient manner and also to serve as a pointer to anther research on the
1.5 RESEARCH QUESTIONS
The word research has been defined as an
investigation into problem with a view of finding out facts on the areas of
study. The area under research is “cost accounting model as a tool for
managerial decision – making”.
Models in general are beginning to gain
recognition in modern time as major source of information.
According to the report of the committee on
managerial decision model. “The judicious use of decision model supplements
institution and implicit guides with explicit assumptions and criteria if the
decision can be depicted by a mathematical model and if the models builder,
captures within his models is like to lead to decision that are more consistent
with a firm’s objective”.
The main purpose of this study therefore is to
relate the theoretical aspect of the study with the practical aspect that is
matched as closely as possible. The model within the actual operation in the
bottling industry. Suing the Nigerian Bottling Company Plc as a case study and
putting into model, all those cost factors that are important as far as the
choice of policy is concerned, leaving out all the irrelevant factors that
contribute litter or nothing to total picture under research is “cost
accounting model as a tool for managerial decision – making”.
In a research work like this, it is normal to
collect statistical data and information relevant to the study in order to
makes the research more reliable. It is also a fact that success in a research
work of every nature largely depends on how extensive the scope of coverage is
spread and position of sources of information.
1.6 scope of the
The cope of the research is to concentrate on
the Nigeria Bottling Company Plc, Ilorin and
their operational effect on manufacturing company in Nigeria.
Furthermore, its covered the various cost
accounting models used as tools for managerial decision making with particular
reference to model that are particular and applicable to the Nigeria Bottling
Company Plc, Ilorin Branch been the case study for this project research, which
will emphasis on their operation for 5 years, i.e. (1998 – 2002) as well as its
various branches all over the federation.
Due to time and financial constraints this
research study would be limited to the NIGERIA
BOTTLING COMPANY PLC, ILORIN and is hoped that any findings of the
research would be applicable to other branches of the company and the bottling
industry in general.
1.8 study plan
This project work is based on the important of
cost account models as a tool for managerial decision making (A case study of
Nigeria Bottling Company Plc, Ilorin).
The researcher believes that the result of
their study will highlight the importance of cost accounting and costing as a
crucial tools used in decision making by the management in achieving their main
motive of minimizing cost and maximizing profits. It will be study under five
Chapter one, throw light on the general
introduction of the research study which is the background of the study, the
objectives and motives of carrying out the research programmes, the
significance of the study, statement of research problems, research questions
scope of the study definition of key terms and finally, the limitations and
problems encountered in carrying out the research programme.
Chapter two, contains review of the related
Theoretical framework, appraisal of literature
Chapter three, is basically on the explanation
on the historical profile of the case study, research hypothesis, data
specification, methods used in gathering information i.e. data collection
population and sample size, sampling techniques and finally, method of data
Chapter four, throws light on the discussion
of the analysis, hypothesis testing and discussion of findings.
Chapter five, is the summary of the finding
that is, the conclusion and recommendation of the study and suggestion for
The researcher believes that this project will
be useful as a basic of analysis the importance of costing and cost accounting
to the management and the organisation.
1.9 DEFINITION OF BASIC TERMS
listed terms has been defined to suit the context of this writing in order to
avoids certain misconception that may arise.
Cost: This is amount of
expenditure incurred on or attributable to a specified thing or activity and at
the simplest level. A cost is determined by two components “the quantity and
Cost unit: As
defined by ICMA is a “quantitative unit product or service in relation to which
cost are ascertained” whether costing is carried out, the focus is to determine
the cost unit of the product or the service.
Cost allocation: This
is the charging of discrete and identification of item of cost centres of cost
unit. It is the allotment of whole item of cost to centre or cost unit that is
responsible for its authorization.
This is the identification of the right or appropriate cost unit or cost centre
where an expenses has been incurred for proper costing activity without
For example if the total salary per month of
the staff in a factory is N60,000 out of this what it cost to pay the nurses
salary may be N20,000 or the word cleaners may receive N10,000 and doctors
This refers to cost that has been accumulated in a cost centre by either
allocation or appointment and are absorbed into cost unit.
This is the process of sharing a commonly incurred expenses proportionately
where two or more cost centre are involved, based on the amount of benefit each
cost centre derived from it.
This is an act of making necessary adjustment after comparing the actual cost
with a standard or targeted cost. Where the actual exceeds the targeted cost a
reduction in cost may become necessary.
Costing Centre: As
defined in the terminology, it is a location person or items of equipment in
respect of which cost unit for control purpose.
Cost Codes: As
defined by ICMA is a “System of symbols designed to be applied to a classified
set of item to gives a brief accurate reference facilitating entry, collation
and analysis”. Such symbols may be mainly series of numbers or alphabets or
mixture of both.
This is a cost, which does not change with the change in the level of activity.
It remains static over a period of time, unaffected by variations in the volume
This is a cost which changes in line with the changes in the level of activity.
Any increase or decrease in the volume of production results in a proportionate
change in cost.
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