ABSTRACT
The aim of this study is to identify the
effectiveness or otherwise in the preparation of budgeting and its control in
the manufacturing company. This is a survey type of research. Fifty respondents
were selected using population census within Lagos. The major instrument used
was questionnaire. The method of data analysis used in the study was table and
percentage distributions. Chi-square was used to test the hypothesis. The core
findings for the results obtained showed that budgeting and budgetary control
are inevitable in the manufacturing company for ensuring rational allocation of
the resources of manufacturing company, it is the improvement in earning
ability, it is the motivational tools for staffs and enhance decision making in
an organization. It was recommended that policies and strategies should be
formulated by the management of the manufacturing company. Conditions and
situations that are likely to preventing the future should be anticipated.
Budgeting is one of the management tools that force managers to a given level
of expectation. Budgetary control is a control technique of planning in advance
of various functions of a business as a whole can be controlled.
TABLE OF CONTENTS
Pages
Title Page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
CHAPTER
ONE: INTRODUCTION
1.1
Background to The Study 3
1.2
Statement of Problem
1.3
Statement of Objectives 4
1.4
Significance of Study 5
1.5
Scope of Study 6
1.6
Historical Background Of Case Study 6
1.7
Research
Questions 9
1.8
Research Hypotheses 10
1.9
Operational Definition of Terms 11
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction 13
2.1 The
Concept of Budget 14
2.2 The Concept of Budgeting 16
2.3 Nature
of Budget 17
2.4 Type of Budgets As It
Relates to Manufacturing Company 19
2.5
The Budgeting Procedure 20
2.6 Revenue
Budget 22
2.7 Master
Budget 22
2.8 The Fixed Budget and
the Flexible Budget Fixed Budget
23
2.9 Budget
Period 24
2.10 The Budget
Committee 25
2.11 Budget
Manual 26
2.12 Budgetary
Control and Accounting System 27
2.13 The
Concept of Control in Budgeting 28
2.14 Essential
Features of Budgetary Control 29
2.15 Advantages of Budgetary Control 30
2.16 Limitation of
Budgetary Control 31
2.17 The
Human Aspect of Budgetary Control 32
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction 34
3.1 Research
Design 34
3.2 Population
of Study 34
3.3 Sample
Size and Sampling Technique 34
3.4 Research
Instruments 35
3.5 Procedure
for Data Collection 36
3.6 Data
Analysis 36
CHAPTER FOUR: DATA PRESENTATION
4.0 Introduction 38
4.1 Data Analysis 38
4.2 Testing of
Hypothesis Using Chi-Square 47
CHAPTER FIVE: SUMMARY OF FINDING, RECOMMENDATION AND
CONCLUSION
5.0 Introduction 58
5.1 Summary of
Findings 58
5.2 Recommendations 59
5.3 Limitation
of Study 60
5.4 Conclusion
61
5.5 Suggestions
for further study 62
Bibliography 63
Appendix
65
CHAPTER
ONE: INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The increasing complexity of business operation and
the ever-changing conditions of the business environment-social, economic,
technological and political factors make it increasingly difficult for a
company to consistently earn a profit that constitutes a fair return on the
capital investment. The internal operation of a firm using financial tools has
been a very long time. Management has to have a plan of action as a means of
monitoring profit and financial control.
Budgeting is the accepted basis for profit planning
and financial control. It has been practiced effectively and profitably by many
progressive companies who generally regard it not simply as a procedure, but as
one of the more important of process of management. Budgeting is one of the
management tools that force managers to perform according to a given level of
expectation.
The process of preparing the budget forces the
executives to become better administrators. It puts planning in the first key
and budgeting primary attention directing because it helps managers to focus in
the operating problems early enough, for effective planning or action.
Budgeting has always been an integral part of various plans. It provides
feedback for the actual result. Budgeting usually has many purposes. The
primary purpose of budgeting, however, is profit planning and control. When budgeting
is conducted under favourable conditions, there is no doubt that a firm which
budget will tend to perform rather better than a similar one that does not
budget.
Budgetary control is a control technique which when
the comparison of the planned state of affairs with the actual state of affair,
and the continuous devising of means of correcting the deviation. It involves
the use of available technique such as operational research, computer science
and, so on to ensure that the budgets are realistic as possible. The budget is
without doubt, the most widely used control device in both business and
governmental circle. The budget is drawn up for control purpose, that is, an
attempt to control the direction that the firm is taking. Indeed, it is used extensively
that to many people; the word budget is synonymous with control still, the
preparation of budget originates as a part of planning process.
Some companies in order to avoid the negative
reaction that are many a time associated with the concept of control, refers to
their budgetary controls as either profit plan or profit paths. The aim of
budgetary control is to provide a formal basis for monitoring the progress of
the organization as a whole and of its components part, towards the achievement
of the objectives specified in the planning budget. Budgetary planning with
budgetary control is part of the overall system of responsibility accounting
within an organization.
A vast number of organization and companies are
getting involved in budgeting and budgetary control in Nigeria, and this is
taking different forms, but the one that seems to be gaining more recognition
is based on the concepts and ideas developed in budgetary control.
1.1 STATEMENT OF PROBLEM
Some problems are identified to why companies make losses.
These problems include;
i Inability to evaluate and assess the
profitability of the organization.
ii What tools to be employed in comparing
organization present or actual performance with the planned or future
performance and how tools can be implemented to give a good deviation and
control?
iii What tools to be adopted in assessing the
organization performance in terms of its fair return on the capital investment?
Going by these problems, the study then consider
budgeting and budgetary control impact on the manufacturing company.
1.2 STATEMENT OF OBJECTIVES
The objectives the appraisal and evaluation of
business organization in the following areas:
i. to itemize the impacts of the budgeting
and budgetary control in the manufacturing industry.
ii. To exemplify by using budgeting and
budgetary control by management for planning, control and decision making.
iii. To know what is budgeting and budgetary
control and why is it of interest and to whom.
iv. To look into ways of encouraging human
supports for budgeting practice.
1.3 SIGNIFICANCE OF STUDY
The outcome of this study cannot be over-emphasized.
These are:
i The effectiveness of budgeting on
achieving their corporate goals.
ii. The study will help in the formulation of
corporate policies concerning manufacturing industry.
iii It will help management to understand ways
in which budgeting could be a powerful tool for planning, control and decisions
making.
iv It will reveal how rational allocation of
resources can be ensured.
1.4 SCOPE OF STUDY
The researcher intends to cover budgeting and
budgetary control as it relates to the private sector and special consideration
been given to the manufacturing or industrial sector.
The expected limitation form a through analysis
includes the following:
i Time
ii Respondents
iii Finance
As a result of these, the researcher will limit the
evaluating of budgeting and budgetary control in Nigerian breweries Plc over
the years.
1.5 HISTORICAL BACKGROUND OF CASE STUDY
Nigerian Breweries Plc is the pioneer and larger
brewery company in Nigeria. The company was established in 1946, and recorded a
land mark landmark when the first bottle of star rolled off the bottling lines
in Lagos on Thursday June12, 1947. Aba Brewery in 1963 and Ibadan Brewery in
1982. The company’s range of product include star Beer (1949), Guilder (1977),
Maltina (1976), legend star Extra stout which came on stream on June 1, 1992,
Diamalt another popular non-alcoholic beverage, 1993 and Amstel Malta
introduced on November 23rd 1994.
Nigerian breweries plc has a high profile
profitability and successful operations can be defined as the follow factors:
Ø Good
product policy
Ø Efficient
management of operation
Ø Strategic
penetration into the market environment
Ø Proper
understanding of consumer attitude and habit.
Ø High
social responsibility profit at national and zonal levels.
In this continual search for improved technology and
in response to government directives that breweries should source their raw
materials locally the company established a N4 million research and development
centre (currently valued at N40 million) to enhance its research activities. It
was commissioned on 15 June, 1987, the research and development center conducts
research on local raw material and their suitability for brewing.
In addition to the intensification of the efforts to
maintain its commitment to excellence, the company extended its brand portfolio
to the stout sector of the market with the emergence of legend extra stout.
Legend has been welcomed by the consumer with the excitement and enthusiasm.
Their reaction pays tribute to and justifies the meticulous care taken in
selecting raw materials of high quality and adopting a brewing process, which
not only ensures but guarantees that legend is brewed as stout should be brewed.
As a major brewing concern, the company encourages
the establishment of business that depend on it for their existence, it is not
generally realized that many organizations and individuals depend largely on
the company for their means for livelihood. These include manufactures of
bottles, crown cork, labels cartons, plastic crates and such services as hotels
or clubs direct customers and attaches.
As a part of its social responsibility, the company
sponsors tables and lawn terms, cycling, chess, golf, squash, badminton, dart,
boat race, ultimate search. The aim is to develop Nigerian women and men to
participate in the national and international stars had their first exposure
and test of stardom through the company sponsored sporting activities.
From the foregoing, we could see that Nigerian Breweries
Plc is a model of success in the private sector. The company’s impressive
performance in the capital market has made its hare the first choice among
Nigerian shareholders. A contributor in the national revenue, the company has
the best training programme in the industry and strives at all times to
contribute to community development project in various parts of Nigeria.
Nigerian Breweries Plc managers are serving in several overseas establishments.
The company’s technical training school in Lagos also refers technical training
to brewery personnel from Zambia and Sierra Leone.
1.6 RESEARCH QUESTIONS
The researcher intends to test the following
research questions in the course of this project.
i will budgeting and budgetary control
increase profit of an organization?
ii will budgeting and budgetary control
ensure rational allocation of resources?
Iii will budgeting and budgetary control be a
motivational tool for staff?
iv will budgeting and budgetary control enhance
planning and decision making in an organization?
1.7 RESEARCH HYPOTHESES
The hypothesis would be formulated as null and
alternative.
H01: Budgeting and budgetary control will not
increase the profit of an organization.
HA1: Budgeting and budgetary control will increase
the profit of an organization.
H02: Budgeting and budgetary control will not
ensure rational allocation of organizational resources.
HA2: Budgeting and budgetary control will ensure
rational allocation of organizational resources.
H03: Budgeting and budgetary control is not a
motivational tools for staffs.
H04: Budgeting and budgetary control will not enhance planning and
decision-making.
HA4: Budgeting and budgetary control will enhance
planning and decision-making.
1.8 OPERATIONAL DEFINITION OF TERMS
v Budget:
A budget is a summary statement of plans expressed in qualitative terms.
v Budgeting:
This is the process of preparing a summary statement of plans expressed in
monetary quantitative terms.
v Budgetary control:
This is the control technique of planning in advance of the various functions
of a business so that the business as a whole can be controlled.
v Control:
The process of setting goals and objective in advance and determining ways of
achieving it.
v Decision Making:
Involve selection from among alternative course of action or most preferred
choice out of many alternative.
v Plans:
A set of things to do in order to achieve something usually done in advance.
v Planning:
This is the process of setting goals and objectives in advance and determining
ways of achieving it.
v Responsibility accounting:
This is a term used to describe a system of decentralization of authority with
performance of the decentralized units measured in term of accounting results.
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