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
of the Study
1.8 Limitation
of the Study
1.8 Operational
Definition of Terms
References
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1
Introduction
2.1.1 Standard Costing
2.1.2 Job Costing
2.2.2 New Institutional Sociology
2.3
Determinants of financial performance
in manufacturing firms
2.2 Theories of Cost accounting
2.2.1 Contingency Theory of
Cost accounting
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
3.6.1 Conceptual Model
3.6.2 Empirical model
CHAPTER FOUR
DATA ANALYSIS, RESULTS AND INTERPRETATION
4.0 Introduction
4.1 General Information
4.1.1 Respondents’ Company
Specialization
4.1.2 Current Number of
Employees in the Respondents Company
4.2
Cost
accounting Practices
4.2.1
Usage of Cost accounting Practices in Respondents Company
4.2.2 Usage of 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 accounting Practices in Respondents
Company
4.2.5
Usage of Strategic Analysis Cost accounting Practices in Respondents Company
4.3
Respondents Opinion on the Importance
of Cost accounting Practices
4.4 Test of Hypothesis
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
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, 2023). 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 6 percent since the turn of
the millennium. For instance, manufacturing contribution to GDP declined from
about 6% in 2020 to 3.91% in 2016 and between 4.03% and 4.17% from 2007 to 2010
(National Bureau of Statistics 2021). 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 (2012) 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 (2023) 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 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, 2018). Such traditional
method adopt practices and techniques such as standard costing and
flexible 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, 2019).
Company performance is the net
result of the combined efforts of all individuals and groups in an organization
(Khandwalla, 2021). 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, 2021). 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
Different
costing methods are meant to suit different organization. The adaptation of the
wrong method, for a company will constitute a problem instead of a solution.
Also, poor or inadequate knowledge of a method of costing has constituted
problems for many firms. The problem among others which this research work
tends to proffer solution to is the problem of identifying the standard method
of cost accounting that will be suitable and adaptable to the manufacturing
industries.
1.3 Objectives of the Study
The general objective of this study
is to find the effectiveness of cost accounting on company performance. However, the following are the
specific objectives:
1.
To ascertain if cost
accounting can be a tool for performance evaluation in manufacturing company
2.
To identify the extent in
which cost accounting can be a tool for performance evaluation in manufacturing
company
3.
To examine the effect of
cost accounting on manufacturing company performance.
1.4 Research Questions
1.
To what extent does cost
accounting affect performance evaluation in manufacturing company?
2.
To what extent does job
costing affect performance evaluation in manufacturing company?
3.
To what dimension does
cost accounting affect various manufacturing company performance?
1.5 Hypothesis
HO: Standard Costing does
not have significant effect on manufacturing company
HA: Cost accounting does
not have significant effect on manufacturing company
HO: Job costing does not
have significant effect on manufacturing company
1.6 Significance of the Study
The following are the outcomes from
the study:
1.
It will be a guide for
manufacturing companies basically on how cost accounting can be used as a tool
for performance evaluation. It will also educate stakeholders in the
manufacturing sector on how cost 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 of the Study
The scope of this study on evaluating
the effectiveness of cost accounting on company performance will cover all the
manufacturing companies in Lagos State and measure cost accounting, job
costing, standard costing by carefully examining their respective performance
evaluation tools.
1.8 Limitation of the 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 Operational Definition of Terms
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, 2020). 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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