CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
Prices
of goods and services are gradually increasing day by day, and due
to the fact that the
sole aim of a businessman, producer or manufacturer is to make profit they end
up making use of low quality materials for production so as to reduce cost of
production and maximize profit. Moreover, with the increase of competitors
around, most of the producers have thought it wise to manufacture or package a
quality product and also enhance their profit level. This elevated the interest
of the researcher to bring to light of how this goal can be achieved through
intensive study of the role of management accountants to cost control and
profit performance in an organization. Apart from cooperate scandals; there has
been anosmatic pressure for better profit maximization as the business
environment became more volatile, prices of products increasing at an alarming
rate, and the production of low quality products.
In the past management
accountants operation is strictly on workers capacity usually separated from
the managers for whom they provided reports and information. But in this
present period, management accountant now serve as internal business
consultants. Working together in cross functional teams with managers from all
sectors of the organization.
However, the management face a broad array of decisions including production, marketing, financial and other relevant decisions. Also having in mind that decision making is a fundamental part of management; the management accountant must be equipped with some knowledge of accounts and management. He must have an understanding and knowledge of the environment and the operations of the organization in which those systems are implemented and appropriate technology to apply in each case for the provision of management information. It is obvious that the management of a manufacturing firm will need information that will enable them consider the factors affecting cost of production, cost reduction, product pricing and investment etc, so as to choose the best alternative.
However, the management face a broad array of decisions including production, marketing, financial and other relevant decisions. Also having in mind that decision making is a fundamental part of management; the management accountant must be equipped with some knowledge of accounts and management. He must have an understanding and knowledge of the environment and the operations of the organization in which those systems are implemented and appropriate technology to apply in each case for the provision of management information. It is obvious that the management of a manufacturing firm will need information that will enable them consider the factors affecting cost of production, cost reduction, product pricing and investment etc, so as to choose the best alternative.
1.2
STATEMENT OF THE PROBLEM
In recent years, the cost of products manufactured
in Nigeria has been very expensive beyond the reach of common Nigerians. This
cost challenges has made many products manufactured in the country unpatronized
by the consumers, and as a result of that expires in the hands of the sellers.
There is also a problem of poor inventory management which leads to
overstocking thereby tying down the company‟s working capital. Another problem
facing some or most of the manufacturing firm is the installation of improper
plan to reduce cost of production so as to maximize profit, i.e. ( making use
of low quality raw material).
Management accountants are assigned with managing cost elements of products among other responsibilities. He aligns cost with efficiency; provide required information for cost minimization so that profit could be maximized. These assignments should reduce product pricing, but instead there have been a consistent product price racketing. These problems therefore brought the need for this research work which intends to find the reason for this persistent increase in product pricing where the services of management accountants were engaged and therefore putting up the following questions:
Management accountants are assigned with managing cost elements of products among other responsibilities. He aligns cost with efficiency; provide required information for cost minimization so that profit could be maximized. These assignments should reduce product pricing, but instead there have been a consistent product price racketing. These problems therefore brought the need for this research work which intends to find the reason for this persistent increase in product pricing where the services of management accountants were engaged and therefore putting up the following questions:
Do management
accountants perform in their responsibility?
Is cost performance inefficiencies of management
accountants included in the product pricing?
Is the recent in price caused by other factors
rather than elements of cost of production managed by management accountants?
How would the role of
management accountant in an organization improve profit performance?
1.3
OBJECTIVES OF THE STUDY
1
To determine the relevance of management accountant in an organizational
internal cost performance efficiency.
2
to ascertain whether the resent increase in cost of products manufactured in
Nigeria is caused by other factors rather than management inefficiency.
3 To ascertain if organizational strategic managers should rely on management accountant information for decision making.
3 To ascertain if organizational strategic managers should rely on management accountant information for decision making.
4 To make
recommendations based on the findings.
1.4
RESEARCH QUESTIONS
To
what extent is management accountant still relevant in organizational internal
cost performance efficiency?
Does the resent increase in cost of products
manufactured in Nigeria caused by other factors rather than management
accountant inefficiency?
To
what extent should strategic managers rely on management accountant information
for decision making?
1.5
FORMULATION OF HYPOTHESIS
The
following hypothesis was formulated for this research work. Hypothesis 1
H0:
management accountant is not relevant in organizational internal cost
performance efficiency
H1:
management accountant is relevant in organizational internal cost performance
efficiency.
Hypothesis
2
H0:
resent increase in cost of products manufactured in Nigeria is not caused by
other factors rather than management accountant inefficiency.
H1: resent increase in cost of products manufactured in Nigeria is caused by other factor rather than management accountant inefficiency.
H1: resent increase in cost of products manufactured in Nigeria is caused by other factor rather than management accountant inefficiency.
Hypothesis 3
H0: organizational strategic managers should not
rely on management accountant information for decision making.
H1: organizational strategic managers should rely on
management accountant information for decision making.
1.6 SIGNIFICANCE OF THE STUDY.
The management
accountant makes the necessary information available to the management by the
application of his skill and knowledge. The significance of this study is to
bring to the notice of the management the exemplary role of the management
accountant and the technique he uses to provide information and also how these
would affect the operations and the attainment of the organizational goal if
these information provided are not recommended for use by the management. And
with such knowledge and information put to use, management would be able to
plan and control the organization such that the cost of operating the business
will be at a minimum while profit will be maximized.
And if the profit
objective is achieved, the customer will benefit from better and cheaper
product while the investors will benefit from the profit as well.
1.7 SCOPE OF THE STUDY
The study is limited as it looks at the role of
management accountants to cost control and profit performance in an
organization. A case study of INNOSON Company Nigeria limited Emene, Enugu.
This research work intends to cover:
1. How
managerial accountants should be able to adapt their generalized knowledge of
accounting to develop customized data and report that are logical and support
sound management process.
2.
The
reporting structure is well defined and standardized.
3. The
methods of preparation of information and the report presented are governed by
rules.
1.8 LIMITATIONS
OF THE STUDY
In the process of carrying out this research work,
the most nagging problem facing the study is how to obtain reference materials.
The time to carry out the research is short and insufficient, since it is done
alongside with some other courses to contend with so as to present a good
result. There are also difficulties associated with personnel‟s accepting to
give vital information which will be of help to the researcher.
1.9 DEFINITION
OF TERMS
Accountant: An
accountant is a practitioner of accountancy or accounting ( referred as an
accounting in the united states), which is the measurement, disclosure or
provision of assurance about financial information that helps managers,
investors, tax authorities and others make decisions about allocating
resources.
Management Accountant:
are those key officers that provide business data and analysis to managers
within organizations to assist in decision making and control.
Profit maximization: A
process that companies undergo to determine the best output and price levels in
order to maximize its return. The company will usually adjust influential
factors such as production costs, price of goods and output level as a way of
reaching its profit goal.
Performance; General
accomplishment of a given task measured against present standards of accuracy,
completeness, cost and speed.
Management;: this is
defined as the process of dealing with or controlling things or people. It is
the responsibility for control of a company or similar organization.
Company:
this refers to a legal entity that carries out business in its name.
Information: this means
data that is accurate and timely, specific and organized for a purpose,
presented within a context that gives it meaning and relevance, and can lead to an
increase in understanding and decrease in uncertainty. Information is valuable
because it can affect a decision or an outcome. For e.g., if a manager is told,
his company‟s net profit decreased in the past month, he may use this information
as a reason to cut financial spending for the next month.
Decision making: the
thought process of selecting a logical choice from the available option. It is
done to achieve a specific objective or solve a specific problem.
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