EFFECTS OF BUDGETING AND BUDGETARY CONTROL IN MANUFACTURING ORGANIZATIONS

EFFECTS OF BUDGETING AND BUDGETARY CONTROL IN MANUFACTURING ORGANIZATIONS (CASE STUDY OF MOJO BEVERAGES NIGERIA, AKOWONJO, NIGERIA AND NESTLE NIGERIA PLC, MUSHIN LAGOS)

ABSTRACT

This study is Effects of budgeting and budgetary control in manufacturing organizations case study of ‘mojo Beverages Nigeria, Akowonjo, Nigeria and Nestle Nigeria PLC, Mushin Lagos. The total population for the study is 200 staff of selected manufacturing companies in Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up HRMS, production managers, senior staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

 CHAPTER ONE

INTRODUCTION

  • Background of 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 organization. Economic enterprises 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, 2006). 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 manufacturing organization.

  • 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 manufacturing companies 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 study. 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 manufacturing companies 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, manufacturing companies, in terms of productivity may be adversely affected. In view of the above, the study is aimed at proffering lasting solutions to those identified problems.

  • OBJECTIVE OF THE STUDY

The objectives of the study are;

  1. To identify and investigate one relationship between the requisite feature and the efficiency of the budgeting and budgetary control, in a manufacturing organization
  2. To examine the impact and the effect, whatsoever, of good budgeting and budgetary control system on the effectiveness and efficiency of a manufacturing company
  3. 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 a technique
    • RESEARCH HYPOTHESES

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H0:   there is no relationship between the requisite feature and the efficiency of the budgeting and budgetary control, in a manufacturing organization

H1: there is relationship between the requisite feature and the efficiency of the budgeting and budgetary control, in a manufacturing organization

H02: there is no impact and the effect, whatsoever, of good budgeting and budgetary control system on the effectiveness and efficiency of a manufacturing company

H2: there is impact and the effect, whatsoever, of good budgeting and budgetary control system on the effectiveness and efficiency of a manufacturing company

  • SIGNIFICANCE OF THE 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 management efficiency. 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 Manufacturing company. 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 Manufacturing company. 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.

  • SCOPE AAND LIMITATION OF THE STUDY

The scope of the study covers Effects of budgeting and budgetary control in manufacturing organizations [case study of ‘mojo Beverages Nigeria, Akowonjo, Nigeria and Nestle Nigeria PLC, Mushin Lagos.]. The researcher encounters some constrain which limited the scope of the study;

  1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
  2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

1.7 DEFINITION OF TERMS

  1. Budget: 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.
  2. Budgeting: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 determined.
  3. Budgetary 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 favourable variance.
  4. Budget 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.
  5. Budget Manual:This document describes the objectives and procedures involved in budgeting. It provides a useful reference source for managers responsible for budget preparation.
  6. Budgetary System:This according to UMA represents an amalgamation of three major components parts of budgeting, budget and budgetary control.
  7. Fiscal 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.
  9. Rolling 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 condition.
  10. Zero Based Budgeting (ZBB):This requires a budget center to justify the entire budget from the scratch (Zero) in each year of budget formulation.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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