The aim of these research
works is to critically assess the impact of budgeting and budgetary control
system in manufacturing companies with special reference to Evans Medical Plc.
Both primary and
secondary sources of data were used in the course of study. Primary source of
data used was questionnaire while the secondary sources used are, text books
and journals. The chi-square formulae, test of significance were employed for
effective analysis of data collected. Data was collected through the
distribution of 40 questionnaires to the staffs of Evams Medical Plc.
The four hypotheses
formulated were subject to thorough tests and all four hypotheses tested were
accepted. The respondents agreed that there is significant relationship between the necessary
requisite feature and the efficiency and effectiveness of budgeting and
budgetary control system. Also there is relationship between a good budgetary
system and the efficiency of a manufacturing company like Evans Medical, and Budgetary
system gives a standard by which the organizations actual performance is
ascertained. Lastly, Human element is of great effect on budgeting and budgetary
control system in an organization such as Evans Medical plc
TABLE OF CONTENTS
1.0 Background of the Study
1.1 Statement of the
1.2 Purpose of the Study
1.3 Hypothesis Formulation
1.4 Research Questions
1.5 Significance of Study
1.6 Method to be used in Carrying out the
1.7 Scope and Limitation of Study
1.8 Definition of Terms
2.0 Literature Review
2.2 Meaning of Budget and Budgeting
2.3 The Meaning of Budgetary Control
2.4 The Nature of Budgets
2.5 Budgetary System and Corporate Planning
2.6 Types of Budgets
The Profit (Revenue) Budget or Plan
2.6.2 The Master Budget
2.7 Usefulness of Budgets
2.7.5 Performance Evaluation
2.7.8 Goal Congruence
2.8 Fixed Budget and Flexible Budget
2.8.1 Fixed Budget
2.9 Budgetary Process
2.9.1 Communicating Details of the Budget Policy
2.9.2 Communicating the Details of the Budget
2.9.3 Determining the Limiting Factor
2.9.4 Preparing an Initial Set of Budget
2.9.5 Negotiation of Budgets
2.9.6 Coordination and
Review of Budgets
2.9.7 Final Acceptance of Budget
2.9.8 Ongoing Review of Budget
2.10 Budget Duration
2. 1 Budget Committee
2.12 Budget Manual
2.13 The Concept of Control in Budgeting
2.14 Usefulness of Budgetary Control
Advantages Of Budgetary Control
2.16 Limitations of Budgetary Systems
Concept of Feedback in Budgeting
Behavioural Aspects Of Budgeting
Budgeting and Forecasting
RESEARCH DESIGN AND METHODOLOGY
3.3 Population and Sample Size
3.4 Research Instrument Design
of Research Instrument
DATA ANALYSIS AND
Characteristics of the Respondent
of Respondents to the Problem Areas.
for Policy Implementation
4.5 Testing and Interpretation of the Hypothesis.
of View Points from Personal Interview
5.0 Summary and Conclusion
5.0 Summary and Conclusion
1.0 BACKGROUND TO THE STUDY
The changing complexity
of business activities and the ever changing conditions of business environment
– social, economic, political and technological advancements make it ever
increasingly difficult for an organization to consistently earn a profit that
could be termed a fair return on the capital invested. Budgeting and budgetary
control has for long been a technique of interest to management accountants,
business experts and financial evaluators. Experts have conventionally accepted
budgeting and budgetary control systems, which are the basic components of
budgetary system, as a fundamental basis for profit planning and control in an
engage in many activities that require not only planning but also monitoring
and co-ordination of plans. We explore the relationship among those activities
in this research work. The comprehensive budget is a tool to make planning effective
and provides a means where the activities are going according to plan. In a
formal way the budget captures and reflects the results of planning decision,
from decision about prices, product mix and cost structure, those about
dividend and major new investments. Budgeting is the act of preparing and
formulating a budget (Certified National Accounts, 2006). And because the budget is a planning or more accurate, a planning process it is the process in which objectives, policies and
policy measures, funding requirement and
sources and allocations of fund stated in the budget are determined. The details of the activities and
procedures will certainly differ from sector to sector (ANAN, journal,
Budgetary control as one
of the component of budgetary system refers to the use of budgets to control
the activities of the organization (ANAN, 2006). It relates the
responsibilities and duties of executive to the requirement of policy and the
continuous comparison of actual performance with expected results so as to
secure either by individual or collective action the objective of such
organizational policies or a revision there of (CIMA).
Therefore, a number of
factors are to be considered and put in place for the effective use of this
technique of budgeting. For instance, Babatunde R. Yusuf (2001) suggested
that the decisions of corporate organizations must be well defined and apart
from obtaining the support of top management echelon, the line and staff
managers must secure information about the policies, preparation of a budget
manual, by the budget committee etcetera. To this end, the study of impact of
budgeting and budgetary control, in a manufacturing organization is worth
purchasing. It is hoped that, the results of this study will provide empirical
evidence for the effective guidance to modify the efficiency of the system in
1.1 STATEMENT OF PROBLEM
In the light of the above
arguments, budgeting and budgetary control involves putting in place every
necessary requisite feature to impact favourably on the manufacturing
organization and to make it more effective and efficient.
The identification of
those problems encountered in Evans Medical plc as an indefinite approach to
budgeting and budgetary control vis-à-vis. The effectiveness and efficiency of
the manufacturing organization is another area of interest for this research
Also in most cases,
manufacturing organization in the private sector lacks the provision of
standard budgetary systems put in place by which the organization’s actual
performance is ascertained.
In addition to the above
postulation, this research work seeks to address probable areas of threats and
opportunities open to Evans Medical plc as may be imposed by human element.
Since a sector like that depends and concentrates on human resources for the
production and marketing of pharmaceutical product.
If the tradition of doing
things haphazardly persists, where a particular technique is not followed and
pursued as consistently as possible as it should be, the effectiveness and the
efficiency of the company, Evans Medical plc, in terms of productivity may be
In view of the above, the
study is aimed at proffering lasting solutions to those identified problems.
1.2 PURPOSE OF THE STUDY
This research study is
aimed at critically and carefully making a consideration of the impact of
budgeting and budgetary controls in a manufacturing organization such as Evans
medical Plc, hence considering the extent to which its effect and purpose, importance and functions
can influence and contribute to the company.
Therefore, to accomplish
the above purpose attention is directed principally on such areas so as to
understand the meaning of the concepts of budget, budgeting and budgetary
control, also identifying the different types of budgets and control to be
applied cum their effective and efficiency.
In order to identify and
investigate one relationship between the requisite feature and the efficiency
of the budgeting and budgetary control, in a manufacturing organization with
special reference to Evans Medical plc.
In the same vein, to
examine the impact and the effect, whatsoever, of good budgeting and budgetary
control system on the effectiveness and efficiency of a manufacturing company
like Evans Medical plc.
It is also the objective
of this study to validate whether budgeting and budgetary control system gives
a standard by which the actual performance of the organization is ascertained.
Also, to find out and
state the effect of the human element on
budgeting system and lastly to determine the extent to which organizational
goals and objectives are achieved vis-à-vis budgeting and budgetary control as
1.3 RESEARCH QUETIONS
Research questions are
those interrogative statements that arise often from the course of study, such
questions are meant to provide information to the study. In order to achieve
the purpose of this research study, the study will attempt to provide answers
to the following research questions.
is the relationship between the necessary requisite features to be put in place
and the efficiency and the effectiveness of budgeting and budgetary control in
an organization like Evans?
there any relationship between a good budgetary system and the efficiency of a
manufacturing organization like Evans?
a budgeting and budgetary control give standard by which the organization
actual performance is ascertained?
is the effect of the human element as it affects the implementation of
budgeting and budgetary control in Evans Medical plc?
much effect or impact does human element have on budgeting and budgetary
Hypothesis is an
assumption, a statement made about the value of a parameter or the observed
fact of a distribution put forward to be tested and proven so as to reject or
accept the preconceived concept. To provide answer to the research questions
arising from the study, the following hypotheses are postulated.
1. Ho: There is no significant relationship
between the necessary requisite features and the efficiency and effectiveness
of budgeting and budgetary control system.
HA: There is significant relationship between
the necessary requisite feature and the efficiency and effectiveness of budgeting
and budgetary control system.
2. Ho: There is no relationship whatsoever
between a good budgetary system and the efficiency of a manufacturing company
like Evans Medical
HA: There is relationship between a good
budgetary system and the efficiency of a manufacturing company like Evans
3. Ho: Budgetary system does not give a standard
by which the organization actual performance is ascertained.
HA: Budgetary system gives a standard by which
the organizations actual performance is ascertained.
4. HO: Human element is of no significant effect
on budgeting and budgetary control system in an organization such as Evans
HA: Human element is of great effect on
budgeting and budgetary control system in an organization such as Evans Medical
1.5 SIGNIFICANCE OF STUDY
This significance of the
research project is to provide both theoretical and practical lasting solution
to problems encountered by managers in instituting control in proposed plans of
the organization in order to achieve the corporate objectives and to aid
This study also is
expected to supply the relationship between the necessary requisite features to
be put in place and the efficiency and effectiveness of budgeting and budgetary
control system in an organization like Evans Medical plc.
Also, this research
project will among other things to be expected to put forward the relationship
between a good budgetary system and the efficiency of a manufacturing
organization like Evans.
Another importance of
this study is it shall establish the fact that budgeting and budgetary control
give standards by which the organizational actual performance is ascertained.
Lastly this study is
aimed at appraising the effect human elements have on the process of budgeting
and budgetary control.
1.6 METHOD TO BE USED IN CARRYING OUT THE
deals with the description analysis and interpretation of various methods
employed for collecting relevant information necessary for research work this research
study is concerned with the impact of budgeting and budgetary control system in
a manufacturing organization. For the purpose of collecting necessary data for
this research work, primary and secondary data collection method will be used.
The primary data collection method will be through the following:
1. Structured questionnaire
2. Personal unstructured interview
The secondary data will
be collected from reports and documents from the company. Also, reports outside
the company and from library and desk research literatures will be used.
In this study,
descriptive method will be used to analyze data and also in resting hypothesis,
chi-square (X2) will be employed. Findings from this research study
will be discussed in the light of the research problem hypothesis, purpose
research questions, literatures of the research and other relevant issues
conclusions will be drawn and recommendations and suggestions also will be
1.7 SCOPE AND LIMITATION OF STUDY
The premise on which this
study is based is that, organizational performance of manufacturing companies
is dependent upon efficient and effective budgeting and budgetary control
system of manufacturing organization in one private sector with special
reference to Evans Medical plc, a pharmaceutical manufacturing company. The
study will also touch briefly the budgetary control process of related
companies in the industrial sector.
The study will further
identify the fundamental limiting factor which most managers usually encounter
in the preparation of the organizational budget.
In the course of
conducting this research work it is expected that the following will constitute
impediments to the effective conduct of the study
a) Time constraint within which the study must be completed.
b) Financial constraint
c) Inaccessible and inadequate data
combining project work with several other activities is another stressful task
that may not allow me to cover research materials extensively.
Nevertheless, I believe
the above limitations will in no way affect the reliability and validity of the
1.8 DEFINITION OF TERMS
According to CIMA, it is defined as a future plan of action or an approved
estimate stated in both financial and quantitative term, prepared and approved
prior to a definitive period of time of the policy to be pursued in order to
achieve an objective during that period.
This is simply a process of preparing a detailed short term plan (budget). It
is the process in which objectives policies and policy measure, finding
requirement and source and allocation of funds stated in the budget are
Control: Simply put, it is the use of budget or budgets to control
operations and activities of the organization. It refers to the continuous
comparison of a level with targeted result so that corrective action could be
taken in the adverse variances while actions taken to the advantage of
Committee: This is a committee responsible for the preparation of the
organization’s budget. It usually comprises of executive management, senior
budget holders and accounting officers.
Manual: This document describes the objectives and procedures involved in
budgeting. It provides a useful reference source for managers responsible for
System: This according to UMA represents an amalgamation of three major
components parts of budgeting, budget and budgetary control.
Policy: Refers to government budgeted measures to regulate the macro
variables and economic activities through her expenditure and taxation.
8. Standard: This is a predetermined level of activity.
Budget: UMA defines it as the continuous updating of a short term budget by
adding say a further month or quarter so that the budget can reflect current
Based Budgeting (ZBB): This requires a budget center to justify the entire
budget from the scratch (Zero) in each year of budget formulation.
1.9 HISTORICAL BACKGROUND OF EVANS MEDIAL PLC
Evans medical plc, was
incorporated in nig on 23rd April, 1954, under the name of Allenbury and
Hasbury (Nigeria) Limited as a pharmaceutical manufacturing and healthcare
delivery company. Presently, its head office is Plot 6, Abimbola Street, Isolo
– Lagos. In 1958, a merger with Glaxo Laboratories a major UK based
pharmaceutical Enterprises gave birth to Glaxo-Allenbury (Nig) Ltd. In 1970,
the company changed its name again to Glaxo Nigeria Ltd their first factory in
Nigeria was built in 1960 at Apapa where they started their manufacturing
activities in 1963. In 1982, the company commissioned its first plant in Agbara
for the manufacturing of its pharmaceutical range of products with capacity for
tablets and syrups. Again in 1989,
inspired by the success of the first plant in Agbara the company built and
commissioned its food factory in Agbara.
The company became a
public limited company in 1977 and was listed on the Nigerian stock exchange in
1979 after 60% of its shares were offered to the Nigeria investing public in
compliance with the indigenization decree of the then military government.
Glaxo group retained the other 40% of the share capital until taken over by
Deveharm limited, an offshore company of the Glaxo Group. On 30th
March, 1994 the name of the company was finally changed to Evans Medical plc.
In compliance with the provisions of the companies and Allied Matters Act CAMA
Evans Medial plc, over
the years and currently parades a very wide and impressive range of effective
and highly sought after product which are household names in Nigeria and
beyond. Such products include allenbury’s glucose ‘O’ multivite, Cofta,
Ferbeian, dequadin, capquin, pirition.
These are in addition to
a very effective and efficient range being introduced as a result of the strategic alliance and cooperation with other reputable players in the pharmaceutical
and healthcare sector acting on the optimistic report of the consultants, the
company embarked on a comprehensive and aggressive turn-around programme which amongst others involve the
revival of the company through the general based African management services
company (AMSCO) which is an
organization formed for the purposes
of providing management and training support for African companies.
At this point also, the
company ventured into diverse fields such as antibiotics, analgesics and anti-malarias
by going into strategic alliances with other credible organizations, such as cipla of India for the
manufacturing of and marketing of ARVS (anti-retrovirals and other prescription
drug as well as healthcare and equipment
for the manufacturing and marketing of
hospital equipment and disposables. These are in addition to the expansion
of the food sector of the company, which was mainly glucose with the introduction
of the company’s brand of instant milk power, Apex, whose acceptance and demand
has been very encouraging.
Highly worthy of note is
the successful of right and public issues of shares of Evans Medical plc, which
achieve 68% and 85% success respectively. This confidence in the profitability
of Evans Medial plc as forecasted by the auditing firm of price water house was illustrated by the
astronomical rise in the share value from the offer rate of
per share to over N4.00k per share soon afterwards.
Having fully and firmly
established their range of quality products and services for over 50 years to
Nigeria and Nigerians, a celebration of its Golden jubilee culminated in the
unveiling of the new corporate logo of the Evan Groups, which is Evans the hop.
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