BUDGETING AS TOOL FOR PLANNING AND CONTROL

BUDGETING AS TOOL FOR PLANNING AND CONTROL IN A MANUFACTURING FIRM (A CASE STUDY OF NIGERIAN BOTTLING COMPANY PLC, ENUGU)

ABSTRACT

The increased complexity of the society and high level of competition in the business world has made it imperative for business organization to do serious planning and control in order to survive volatile business climate. This research work studied budgeting as a tool for planning and control in a manufacturing firm with particular emphasis on Nigerian Bottling Company PLC, Enugu. The main objective of this study was to x-ray the relevance of budgeting as tool for planning and control in manufacturing firm. And also to ascertain the effect of non-existence of budget on the performance of business organization. The methodology adopted were simple percentage and chi-square statistical methods to deduce general statement about the effect of budgeting on planning and control is relevant for the survival of manufacturing companies. Also, budgeting is a tool for measuring efficiency and performance in manufacturing firm. The recommendations put forward was that management of every organization should prepare budgeting and adhere strictly to the provisions of the budget. There should also be a regular and periodic review of the budget in order to detect variations. The research work will serve as a template to managers, entrepreneurs, creditors, and employees on how to effectively allocate scarce resources judiciously through budgetary planning and control.

TABLE OF CONTENTS

Title page        =          =          =          =          =          =          =          =          =          i

Approval page =          =          =          =              =          =          =          =          ii

Declaration                  =          =          =  =          =          =          =          =          iii

Dedication                  =          =          =          =          =          =          =          =          iv

Acknowledgement                  =          =          =          =          =          =          =          v

Abstract          =          =          =          =          =          =          =          =          =          vi

Table of content          =          =          =          =          =          =          =          vii

List of table                 =          =          =               =          =          =          =          viii

1.6       Significance of the study        =          =                =          =          =          6

1.7       Scope of the Study                 =          =          =          =          =          =          7

1.8       Limitation of the Study          =          =          =     =          =          =          8

1.9       Definition of Terms    =          =          =          =          =          =          =          9

            References

CHAPTER TWO

2.1       Review of Literature   =          =          =    =          =          =          =          12

2.2       The Concept of Budgeting     =          =          =             =          =          13

2.3       Benefits of Budgeting            =          =       =          =          =          =          16

2.4       Type of Budgeting                  =          =             =          =          =          18

2.2.1    Fixed Budget  =          =          =          =          =   =          =          =          18

2.2.2    Flexible Budget          =          =          =          =             =          =          19

2.2.3    Master Budget                        =          =          =                  =          =          20

2.2.4    Functional Budget      =          =          =          =          =          =          21

2.4       Approaches to Budgeting       =          =          =    =          =          =          25

2.4.1    Zero-based Budgeting            (ZBB)  =                    =          =          =          25

2.4.2    Planning, Programme and Budgeting System (PPBS)               =          27

2.4.3    Rolling of continuous budgeting        ==          =          =          =          28

2.4.4    Tool for effective budgeting   =          =   =          =          =          =          29

2.5.1    Budget committee      =          =          =  =          =          =          =          30

2.5.2    The Accounting Staff =          =          =          =          =          =          32

2.5.3    Budget manual            =          =          =           =          =          =          32

2.6       Management Planning through Budgeting             =          =          33

2.7       Profit Planning Process           =          =            =          =          =          34

2.8       The Budgetary Control Process          =           =          =          =          36

2.8.1    Establishment of standards as the basis for control    ==      =          41

2.8.2    Measurement of performance             =          =             =          =          41

2.8.3    Comparing performance against standard      =           =          =          42

2.8.4    Corrections of in favourable deviations          =          =          =          42

2.9       The human aspect of budgeting and budgetary controls        =          43

2.10     Possible Limitations of Budgeting     =          ==          =          =          44

2.11     Stages in the Budgeting Process         =             =          =          =          44

2.12     Assembling the Master Budget for a Manufacturing

 organization                =          =          = =          =          =          =          46

 Reference

CHAPTER THREE: METHODOLOGY

3.0       Introduction    =          =          ==          =          =          =          =          49

3.1       Research Design         =          =           =          =          =          =          49

3.2       Sources of Data          =          =        =          =          =          =          50

3.3       Primary Sources          =          =          =          =          =          =          50

3.4       Secondary                   =          =          =          =          =          =          50

3.5       Population of Study    =          =          =          =          =          =          51

3.6       Determination of Sample Size            =              =          =          =          51

3.7       Sampling procedure                =          =          = =          =          =          52

3.8       Questionnaire administration  =          =              =          =          =          52

3.9       Questionnaire administration schedule          =          =          =          52

3.9       Method of analysis and hypothesis testing     ==          =          =          53

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.0       Introduction    =          =          =         =          =          =          =          55

4.1       Presentation of Data and Analysis     =          =          =          =          55

4.1.1    Question on Personal data      =          =       =          =          =          56

4.1.3    Whether the system of budgeting provides a formal budget           58

4.1.4    Whether the Responsibility of Every Individual is Defined             58

4.1.5    Whether the Budget is a performance Evaluator in your company       = 59

4.1.7    How does your company respond to deviation             =          =          60

4.1.8    The Type of Budgeting Operated       =            =          =          =          62

4.1.9    Whether the Budget is a tool for measuring efficiency in the company =     63

4.1.10  Whether the Budget is relevant to management in decision making =          64

4.1.11  Is the budget a tool for measuring efficiency in your company      66

4.1.12  Whether the system budgeting provide a formal budge          =          71

4.1.13  What the survival of your company depends on contingency table   =          76

CHAPTER FIVE: SUMMARY OF FINDINGS, RECOMMENDATIONS AND CONCLUSION

5.0       Introduction    =          =         =          =          =          =          =          80

5.1       Summary of Finding   =              =          =          =          =          =          80

5.2       Recommendation       =          =          =          =          =          =          82

5.3       Conclusion              =          =          =          =          =          =          83

 Bibliography

 Questionnaires

LIST OF TABLES

4.1       Question on Personal Data     =          =          =          =          = =          56

4.2       Question on the existence of a system of budgeting  =                      57

4.3       Whether the System of Budget provides a formal Budget    =   57

4.4       Whether the responsibility of every individual is defined     =          58

4.5       Whether there is a Budget Committee           =           =          =          59

4.6       Whether Annual Budgets are always acceptable to all levels of staff         60

4.7       The type of Budget being operated    =   =          =          =          =          62

4.8       Usage of the Annual Budget          =             =          =          63

4.9       Adherence to budget provision          =          =               =          =          64

4.10     Evaluation of budget implementation              =          =  =          65

4.11     Whether the budget is a tool for measuring efficiency                    66

4.12     The usefulness of budget to management in decision making           =          67

4.13     Whether effective budgeting and budgetary planning and control Contribute to the success of the organization             =          =          =      68

4.14     Whether budgets make profit planning and progress possible          69

4.15     Whether the survival of the company depend on effective budgetary planning and control               =          =          =          =          =          =          70

4.18     Testing of hypothesis              =          =          =          =          =          =      73

CHAPTER ONE

1.0   INTRODUCTION

The success of every organization depends largely on effective planning and control. Planning and control are pre-conditions for the attainment of organizational goals. The objectives of organization are realized through a careful plan of action and control. Both public and private organizations are established for the purpose of achieving specific objectives. Budgetary planning and control are managerial functions responsible for setting specific targets or expectation to be met. Budgeting is not only a management planning device but also a basic accounting model for managerial control. In manufacturing firm, planning and control are used to set profit target, revenue, prices and cost.

Hence, planning is the process of deciding ahead of time, what a firm seeks to achieve and how it seeks to achieve them. Planning is future-oriented. Control on the other hand, is the evaluation of performance and the putting in place of corrective measure where necessary. Control seeks to compare plans with actual goal realized. Control entails restrain, supervision, safeguarding, checking or even to correct deviations.

  1. BACKGROUND OF THE STUDY

In a manufacturing industry, and other business organization, top or line managers are faced with problems of limited resources due to organization policies. Such policies may include income and expenditure policies, raw material utilization policy, purchasing policy, production policy, labour and time limit policies, it is viewed against the above mentioned background that the concept of budgeting as a tool for planning and control is pertinent. It is about making plans for future, implementation, and monitoring of activities to see whether it conforms to the plan.

Budget is thus, a formal expression of managerial plan in quantitative and monetary terms encompassing different phases of operation aimed at assisting management in the realization of organization’s objectives. Budgeting is a financial and quantitative interpretation, prior to a defined period of a policy to be implemented in order to achieve a given objective.

  1. STATEMENT OF THE PROBLEM

Generally, organizations are faced with limited resources and the allocation of scarce resources to meet competing needs. The problem bedeviling most organization is how the available scarce resources can be allocated effectively and efficiently to achieve organizational objectives.

The problem therefore, is most manufacturing firm do not appreciate the relevance of budgetary planning and control for its survival.

Another glaring issue is the attitude of employees toward budget implementation. Budgeting may create a sense of confusion, frustration, suspicion and even hostilities within organization because employees regard the goals of the organization as alien to their individual goal.

Most often, government establishment feel that budgeting is a mere paper work that can be toyed with, thus, most management executive do not adhere strictly to the budget or implement it religiously. While many private firms feel that there is no enabling law binding on them to prepare a budget. This often makes them to operate without a formal budget.

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