BUDGETING AS A TOOL FOR PLANNING AND CONTROL IN A MANUFACTURING FIRM


BUDGETING AS A 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

Acknowledgment v

Abstract vi

Table of content vii

List of table viii

CHAPTER ONE: INTRODUCTION

1.1 Background of Study =2

1.2 Statement of Problem =3

1.3 Objectives of Study =4

1.4 Research Questions =4

1.5 Hypothesis Formulation5

1.6 Significance of the study6

1.7 Scope of the Study7

1.8 Limitation of the Study8

1.9 Definition of Terms =9

References

CHAPTER TWO: LITERATURE REVIEW

2.1 Review of Literature =12

2.2 The Concept of Budgeting =13

2.3 Benefits of Budgeting =16

2.4 Type of Budgeting18

2.2.1 Fixed Budget =18

2.2.2 Flexible Budget19

2.2.3 Master Budget20

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 manual32

2.6 Management Planning through Budgeting =33

2.7 Profit Planning Process34

2.8 The Budgetary Control Process36

2.8.1 Establishment of standards as the basis for control =41

2.8.2 Measurement of performance41

2.8.3 Comparing performance against standard =42

2.8.4 Corrections of in favourable deviations42

2.9 The human aspect of budgeting and budgetary controls43

2.10 Possible Limitations of Budgeting =44

2.11 Stages in the Budgeting Process44

2.12 Assembling the Master Budget for a Manufacturing

organization46

Reference

CHAPTER THREE: METHODOLOGY

3.0 Introduction =49

3.1 Research Design49

3.2 Sources of Data50

3.3 Primary Sources50

3.4 Secondary50

3.5 Population of Study =51

3.6 Determination of Sample Size51

3.7 Sampling procedure52

3.8 Questionnaire administration =52

3.9 Questionnaire administration schedule52A

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 deviation60

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 company66

4.1.12 Whether the system budgeting provide a formal budge71

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 Recommendation82

5.3 Conclusion83

Bibliography

Questionnaires

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.

1.1 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.

1.2 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.

1.3 OBJECTIVES OF THE STUDY

The objectives of this study shall include:

1)

To ex-ray the relevance of budgeting as tool for

planning and control in manufacturing firm.

2)

To ascertain the possible effect of non-existence of

budget on the performance of business organization.

3)

To create an opinion as to whether budgeting is

actually an effective tool for profitability planning and

management control.

4)

To ascertain the extent to which budgetary planning

and control aid management in decision making.

1.4 RESEARCH QUESTIONS

The following research questions are formulated for the

study.

i.

To what extent does the private sector appreciate the

relevance of budgetary planning and control?

ii.

What is the attitude of employees towards budget

.

BUDGETING AS A TOOL FOR PLANNING AND CONTROL IN A MANUFACTURING FIRM



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