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THE ROLE OF THE MANAGEMENT ACCOUNTANT IN PROFIT MAXIMIZATION (A CASE STUDY OF EMENITE)
ABSTRACT
In analysis the activities of the management accountant, it is identified as one of the key officers of the accounting department. Three are certain available the required information’s.
The management accountant perfumes the functions of providing information for planning, controlling company’s operation, in his planning responsibilities, he quantifies and interprets the effects of planned transactions and other economic events on the organization.
He also ensure the accountability of resources of the company. He participates indirectly in the management process by virtues of his duties
CHAPTER ONE
- INTRODUCTION 1
1.1 PURPOSE OF THE STUDY 8
- SIGNIFICANCE OF THE STUDY 9
- STATEMENT OF PROBLEM 10
- HYPOTHESIS 13
- LIMITATIONS OF THE STUDY 13
- SCOPE OF THE STUDY 14
- RESEARCH QUESTIONS 15
- DEFINITION OF TERMS 15
CHAPTER TWO
LITERATURE REVIEW 16
2.0 PROFIT MAXIMIZATION 16
- CONCEPT OF COST 17
- THE CONCEPT OF COST REDUCTION 18
- COST CONTROL AND COST REDUCTION 19
- STANDARD COSTING 26
- MARGINAL COSTING 38
- BUDGETING 55
CHAPTER THREE
RESEARCH METHODOLOGY
- RESEARCH DESIGN 63
3.1 SAMPLING PROCEDURE 64
- DATA COLLECTION 64
- QUESTIONNAIRE DESIGN 64
- RETURN ON QUESTIONNAIRE 65
- DATA ANALYSIS TECHNIQUE 65
- PERSONAL INTERVIEWS 66
CHAPTER FOUR
PRESENTATION AND ANALYSIS
- PRESENTATION AND ANALYSIS 67
4.1 DATA CLASSIFICATION TABLE 67
CHAPTER FIVE
DISCUSSION ON FINDINGS, CONCLUSION AND RECOMMENDATION
- DISCUSSION ON THE FINDINGS 76
- CONCLUSION 82
- RECOMMENDATIONS 83
BIBLIOGRAPHY 85
QUESTIONNAIRE 89
CHAPTER ONE
1.1 INTRODUCTION
modern business organization operates in an environment that is considerably complex. Since the 1970’s, managers have had to cope with rising interest rates, material shortages crisis, escalating inflation and environment regulations, to name a few of the growing completes. Infact the traditional method pf analysis problems and making decision have often been fund incapable of effectively handling this increase complexity. Due to this changes that exist within the environment, it becomes an important characteristic of a good management to be able to evaluate the past changes to react to current changes and to be able to predict the future changes. In this direction, management needs information continually that will help in the planning and control of the operations of the organization.
The need for accountability has given rise to cost accounting system, which provides information that is useful to management for internal reporting objectives. Due to the complexities of most organizations, the system of most organizations. The system of cost accounting is therefore becoming complex. These complexities have created a body of professionals with special expertise in this area. They are called management accountant, and area of study is know as management accounting. Woody etal (1985) define management accounting: as
“The process of identification, measuring accumulating, analyzing preparation, interpretation and communication of financial information used by management to plan evaluate, nd control within an organization nad to ensure appropriate an organization and to ensure appropriate use of and accountability of its resources”.
From the above definition, it means that he management accountant has a range of function to carry out an organization. According to ICMA.
“management accounting is the presentation of accounting information in such a way as to assist management in the creation of policy and in the day to –day operation of an undertaking”.
To achieve this aim, the management accountant is interested in the past, present and the future. Useful information can be extracted form past result, which together with reports of current performance, can point the way to immediate management action. Forecast enable management to evaluate current result more readily an may also reveal areas of business which require corrective actions.
David fanning (1983) defined management accounting as:
“The application of professional knowledge and skill in the preparation and presentation of accounting information in a way. As to assist management, in the formulation of policies and in the planning and control of operating of the undertaking.
It is designed to proved information for internal problem solving. The management accounting system of planning nad control is designed to spur nd help chief executives search for and selecting short run and long run goals and implementing plans, appraising performance and pin – pointing deviations from plans.
To be able to do all these, the management accountant must have some knowledge account in different filed. He must have a through understanding and grasp of the operations of the organization in which these systems are implemented, and the appropriated technology to apply in each case for the provision of management information. Information provision depends solely on the type of business. It is obvious that the management of a manufacturing company will need information that will enable them consider factors affecting cost of production, cost of classification, coast reduction, product pricing market share of the products, choice of the product lines diversification and investment. However, a trading company needs information that will concentrate decision on customer’s demands advertisement and product branding.
To perform his task efficiently, the management accountant uses data from the financial and cost accounting system, he conducts special investigations to gaquited data he uses accounting techniques and appropriate techniques from statistics and operations research. He considers the human element in all activities so that a all times he will proved information, which is relevant for the in a report from must be such that the value is enhanced or at least maintained. He interprets the data and communication the same to management.
The inability of the management accountant to perform his duty would result in shortage of information for long run and short run planning systems and the necessary control to be made, the most basic objective (significant goal) behind the continuous existence of nay businesses organization wealth, is said to be need to maximize its wealth through profit making. Among the various objectives of business concerns, profit maximization ranks high. Top level management needs especially, accurate and timely information for decision making in order to achieve this noble objective. Welch (1976), the profit maximization can only come about through an efficient and effective management process. Nigeria being a development country, it is pertly clear that operating or running costs of business are increasing at a very high rate. Many manufacturing companies in Nigeria suffer from serious profit squares. They are struggling to maintain reasonable earnings in a situation whole costs are rising, thereby making profit margins more and more difficult to sustain. Meanwhile the Nigeria manufacturing companies as reported by manufacturing association Nigeria (MAN) in its 1997 economic review are faced with escalating costs of producing arising from the adoption of macro economic policies which are inflationary. This trend reinforces the imperativeness of the application of sound. Management accounting techniques in the manufacturing companies.
Interestingly, Adewumi (1989) posits that management practice is yet to have its rightful place in Nigeria manufacturing companies. This implies that the principle of management are a rarity in most Nigeria manufacturing firms.
A careful study of Nigeria manufacturing companies reveals a decrease in productivity gross in competence and lack of motivation on the part of top management and their subordinations, in consequence, there has been some introduction of cost reduction and control techniques. Many firms have evolved various measures to check the sky –rocketing costs through improved technologies, job timing, setting of standards, procurement of cheaper and alternative local raw material to produce the same product without impairing its quality and standard (functional value ).
The place of the management accountant is most crucial in regard. It shows what kind of information is required, where these information can be obtained and how it can be utilized in order to achieve the objective of profit maximization. The prime function of the management accountant is to provide management with facts and figures to enable them to make objective decisions for profit maximization based on this information. The management accountant has at his disposal all the usual accounting records: the general ledger, and the cost ledger, the sales and purchase ledger, the cash book and all the subsidiary day books and journals. There may also be useful fixed assets, stocks, production and sales records order to do his job effectively, he must process. This data into information for management. The management accountant is abreast with practices and techniques such as budgeting, setting standards, etc. in order to generate data with the ultimate purpose of cost minimization and it attaining profit maximization. However these are predicated on the quality information generated.
In order to maximization profit in the face of these conditions company has take very stringent measures to reduces cost, eliminate unnecessary waste as to increase productivity and improve aggregate profitability the role of the management accountant in profit maximization is inseparably linked with the general planning and control of a firm. Thus profit maximization is firm rooted in the era aims of the planning and control of the firms resources. The role of management accountant cannot his technical knowledge, experience and judgment in contributing to the success of the manufacturing industry.
- PURPOSE OF THE STUDY
It is pertinent that the roles of the management accountant are analysis and also the techniques employed in achieving profit maximization
The purpose of this study therefore, is to intimate the top level managers of the curial roles of the management accountant in the overall management process, planning through controlling in order to ensure profit maximization.
- SIGNIFICATION OF THE STUDY
The study of the management accountant is to make available the necessary information to managers at all levels by the application of his knowledge and skills.
The significance of this study is to bring to the notices of management the exemplar role of the management accountant including the techniques used to provide information, and how these would affect the operations of the organizations if no reconnection is made. With such knowledge, management would be able to plan, and control the organization and the cost of operating the business will be at a minimum while profit will be enjoyed.
Workers n non-managerial position would also benefit from this study, since they tool would have to have to be involved at one point or the other in management of organization.
Would also be availed from careful study of this research work, of the opportunity to evaluate the importance of management accounting as an information tool in business organization.
- STATEMENT OF THE PROBLEM
There has been a considerable lack of appreciation by many as to the intrinsic value of management accountants,. Manufacturers like other business executives have had to appreciate where such values lives of the past thirty years have stimulated the development of management accounting as an information tool in business organization such events include the increased competition in business and rapidly developing technology the resultant changes that have emerged have intensified manager’s need for information that continually for financial information beyond that contained in traditional income statement and balance sheet.
Over the last three decades, products have become obsolete at an alarming rate. The advent of various scientific break through have resulted in the development of many new basic components such as the transistor and electronic “Chip” which have literally reib-intionzed many industries nad their products. Scientific researchers report through, that this revolution is only its beginning. Drastic changes have taken place in production methods over the last three decades. The term ‘automation’ especially in manufacturing vogue. Today many products are produced virtually untouched by human hands. Oil refine operations are controlled by massive computer networks, machine tools are electronically controlled and there are even some entire manufacturing plans where workmen, do little more than monitoring instrument panels. Modes of management and method of decision making have been affected by the development of powerful new quantitative (modes) tools such as linear programming probability analysis and decision theory. These new tools, which have come to be from the mathematical and statistical sciences, are becoming indispensable in day-to-day decision making.
More than doubled over the last ten years. These cost increase have forced the companies involved to make many adjustments including modification of products, changes in methods of marketing and the discovery of new source and means of financing.
The economic impact of these and other factors have been far reaching. As managers competition, escalating costs, and evolving technology, thus the role of management accounting as an information tool has expanded from what was common in earlier years.
The manufacturing sector is an important sector of the Nigeria economy. It contributes significantly to the growth of the industrialized sectors manufacturing involves (cost0 inputs which cost component to the firm. These costs must of necessity be watched and monitored, since the excess of income over expenditure is profit, then there is need for the business firm to have full control over cost (expenditure) so as to realize the managerial objectives of survival, growth and expansion in a competitive environment.
There is also the problem of poor inventory management, which leads to overstocking, thereby tying Devon the firm’s working capital. Other problems range from types of plan installed to reduces costs.
HYPOTHESIS
Ho: Costs are classified by management accountant to provide useful information for profit planning
Hi: costs are not classified by management accountant to provide useful information for profit planning.
Ho: The management accountant’s fixed costs always constant over the relevant range of output.
Hi: The management accountant’s fixed costs are not always constant over the relevant range of output.
- LIMITATIONS OF THE STUDY
I The major limitation of this study is the time allowed to carry out the research which is very short and the researcher has to contend with other courses in the curriculum so as to pass well, so there was not enough time to give this work a through research.
Ii There is lack of related literature on the topic for the researcher to do a very comprehensive work.
Iii there was also lack of adequate finance to administer the questionnaire, follow up visits and other requirement.
Iv lack of co-operation from the company executives who often complain of lack of time and their reluctance in giving enough information .
- SCOPE OF THE STUDY
In a bid to keep the project within a manageable limit nad in view of the limited time and resources available the researcher has localized and confined the study a manufacturing company in Enugu,. This work has been divided into five chapters. The first chapter beings with an introduction of the historical objectives of business. Then there is statement of problem , followed closely are some questions for research of which the researcher intends to provide answers.
There is also the purpose of the study and significance, then some the limitations of the study and finally the scope.
1.8 RESEARCH QUESTIONS
With the statement of the problem in perspective the study sought answer to the following questions.
1) What role does the management accountant plan in the planning and control cost in a manufacturing concern?
2) What techniques does the management accountant employ in order achieve the significant goal of profit maximization?
3) How does the management accountant his roles in order to maximize the profit potentials a firm?
- DEFINITION OF TERMS
ROLE:- means a person plays in real life.
MANAGEMENT ACCOUNTANT: Is a person whose work is keeping accounts i.e making record sums of received and spent
FIRM: Is a business company
PROFIT MAXIMIZATION: Is making a big gain in your firm.
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