The study was conducted to examine the effect of Cost Accounting on management decision of a manufacturing organization with a particular reference to Champion Breweries Limited, Uyo, Akwa Ibom State. A survey design was used through questionnaire instrument to collect primary data. Forty (40) respondents embracing both managers and senior staff were as sample size for the study. Data for the study was analyzed using tables and percentages. A statistical tool of Pearson Product Moment Correlation Co-efficient (PPMCC) was used for test of hypothesis. The study statistically proved that alternate hypotheses (H1) were accepted. The study revealed mainly that: there is a significant relationship between cost accounting technique and management decision in Champion Breweries Limited, Uyo and also there is a significant relationship between the application of accounting information, principles and cost control techniques and management decision in Champion Breweries Limited. The study also reveals that a high turnover is recorded due to marginal cost per unit of the product sold to customers. It was recommended that appropriate method of costing techniques be adopted to ensure effective and reliable management decision that competent accounting personnel should be employed to render quality service to this organization. Finally, managers and senior staff should avail themselves of the On-going seminars, workers and induction training on the “The Effect of Costing Techniques in Production Process”.            


Declaration - - - - - - - - - i

Certification - - - - - - - - ii

Dedication - - - - - - - - - iii

Acknowledgement - - - - - - - iv

Abstract - - - - - - - - - v

Table of contents - - - - - - - vi


1.1 Background to the Study - - - - - 1

1.2 Statement of the Problem - - - - - 6

1.3 Objectives of the Study - - - - - - 7

1.4 Research Questions      - - - - - - 8

1.5 Research Hypotheses - - - - - - 8

1.6 Significance of the Study - - - - - 9

1.7 Scope of the Study         - - - - - - 9

1.8 Limitations of the Study - - - - - 10

1.9 Definition of Terms - - - - - - 10

1.10 Organization of the Study - - - - - 12


2.1 Theoretical/Conceptual Framework - - - 14

2. 1.1 Theoretical Background of the Study - - - 22

2.1.2 Conceptual Background of the Study and other Literatures 24

2.1.3 Allocation and Apportionment - - - - - 26

2.1.4 Classification of Cost System    - - - - - 27

2.1.5 Choosing Cost Units  - - - - - - 29

2.1.6 Techniques of cost Accounting - - - - 30

2.1.7 Evaluation of Marginal Costing Technique - - 36

2.1.8 Marginal Costing and Management Decision  - - 37

2.1.9 Capital Expenditure and Investment Decision - - 39

2.2 Empirical Literature Review  - - - - - 41

2.3 Summary of the Literature  - - - - - 48                      


3.1 Research Design - - - - - - - 55

3.2 Population for the Study  - - - - - 55

3.4 Method of Data Collection - - - - - 56

3.5 Estimation Technique - - - - - - 56

3.6 Data Collection Instrument - - - - - 57

3.7 Reliability and Validity of the Measuring Instrument - 58

3.8 Nature and Sources of Data - - - - - 58


4.0 Data Presentation - - - - - - - 59

4.2 Data Analysis - - - - - - - 59

4.3 Test of Hypotheses - - - - - - 66

4.3.1 Test of Hypothesis One - - - - - - 67

4.3.2 Test of Hypothesis Two - - - - - - 68

4.4 Re-statement of hypotheses - - - - - 69

4.5 Discussion of Findings - - - - - - 70


5.1 Summary of Findings - - - - - - 73

5.2 Conclusion - - - - - - - - 75

5.3 Recommendations  - - - - - - 75

5.4 Contribution to Knowledge - - - - - 77

5.5 Suggestion for further Studies - - - - - 77





1.1 Background to the Study

Cost accountingis the process of accounting for cost from the point at which expenditure is incurred or committed to the establishment of its ultimate relationship with cost centres and cost units. In its widest usage it embraces the preparation of statistical data, the application of cost control methods and the ascertainment of the profitability of activities carried out or planned. 

In a company, managers intensely rely on work of cost accountants for internal decision, making decisions like to buy a product or not to etc. Although manufacturers are now willing to accept as a principle that costing is of value, there is still a considerable lack of appreciation by many of them as to where its value lies.

According to Owler and Brown(1932) in Wheldon’s cost accounting and costing methods it enables a business not only to find out what various jobs or processes have cost but also what they should have cost. In like manners it indicates where fosses and wastes and occurring before the work is finished, and therefore immediate action may be taken, if possible, to avoid such loss or waste. 

Business policy may require the consideration of alternative methods and procedures, and this is facilitated by cost information correctly presented, for example, by the aid of cost accounting reports management can decide whether the manufacture of certain product increases overhead expenditure disproportionately whether to treat by- products even if a loss, to make possible a more important trade in another product; where the plant and machinery could be used more advantageously by concerting on particular products to the exclusion of less profitable ones; or where prices could or should be adjusted. 

Cost accounting information is designed for managers in taking decisions only for their own organizationthere is noticed for the information to be comparable to similar information from other organizations instead the important criterion is that the information must be relevant for decision that managers operating in a particular environment of business including strategy make, cost accounting information is commonly used in financial accounting information but first I am conceptually in its use by managers to take decisions. 

The Accountants who handle the cost accounting information generate and add value by providing good information to managers who are taking decisions. Among the better decisions, the better performance of your organization, regardless if it is a manufacturing company, a bank a non-profit organization, a government agency, a school club or even a business school. 

The cost accounting system is the result of decisions made by managers of an organization and the environment in which they make them. The organizations and managers and most of the times interested in and worried for the cost. The control of the costs of the past, present and future is part of the job of all the managers in a company. In the companies that try to have profits, the control of cots effects directly to them knowing the cost of the products is essentials for decision-making regarding price and mix assignation of products and services. 

Management of an organization is confronted with the problem of choosing from various alternative courses of action. They rely on reports provided to make effective and efficient decision for the benefit of the organization. Sometimes management takes decision haphazardly because they are not guided by appropriate costing techniques in their operation and this affects the overall profit status of the business. Certain cost accounting techniques and procedures are applied in order to have a comparative analysis about cost both directly and indirectly engaged in manufacturing outfit like Champion Breweries Limited. A good manager should not apply costing technique without in-depth relationship to what cost is all about. In this perspective Adeniyi (2012) posits cost as a resource sacrificed or forgone to achieve a specific objective. It is usually measured as the monetary amount that must be paid to acquire goods and services. An actual cost is the cost incurred (a historic) as distinguished from budgeted or forecasted cost. To guide organizational decisions, managers want to know how much a particular thing. (Such as a product, service or process) costs. A good manager in an organization should have a fair knowledge of some cost concepts such as cost unit, cost centre, cost analysis and cost behavior pattern for effective decision making. 

According to Adeniyi (2012), one way of improving efficiency and standards as to improve the efficiency of material usage; the productivity of labour or the efficiency of machinery or other equipment, this will ultimately enhance quality decision of the management. Cost must be minimized, cost must be controlled and profitability must be improved. These are the cries of managers echoing through the length breath of industry. 

As Nigeria is passing through a recession period, all hands must be deck to enable the economy make a quick recovery. One way of adequately responding to these clarion calls by managers in manufacturing firms is the adoption of appropriate accounting costing technique aimed at improving efficiency for effective profitability. 

According to Asechemic (1994), it is said that “A firm that is successful in cost control through adequate accounting costing technique” afford to sell its product at a lower price than its competitors. According to Batty(1982) “cost control implies the comparison of actual and standard cost and then taken corrective action on any variances which has arisen. He stressed further that for a cost control system to achieve a desired objective, there is need for appropriate accounting cost technique to be in place.

Managing a business tends to be a very difficult task and sometimes interested depending on individual perception and approach. In managing a business outfit, the functional element of management (organizing, planning, control and decision making) interplayed and these are adequately influenced by adoption of appropriate accounting techniques that will cushion the effect of probability. The essence of application of these accounting cost techniques is to foster future growth and progress of a company, increase profit and financial status of a business and to enable reliable corporate reports to be prepared to customers, the public, creditors and other users of the company’s financial statement. Management should exercise carefulness in the choice of accounting costing techniques since costing report used for a particular decision could be useful or harmful for another purpose. Plans are activated by decision and significant number of decision requires some quantitative and financial analysis. In order that a rational choice be made, it is then imperative to produce relevant information for decision making purpose. 

1.2 Statement of the Problem 

A manager of small scale business who manageshis/her business intuitively without application of accounting control techniques often,would remain small in nature and without growth. It is one thing to apply the resources in the manufacturing process but absolutely another thing to ensure it is properly used for its intended purpose. 

An evaluation of cost accounting techniques in management is not guaranteed as improper decisions are taken in organization. In the main, cost accounting technique faces a lot of challenges, difficulties and perceptions. These have resulted in credibility problem which hinders operations of the manufacturing outfit (Champion Breweries Limited) and ultimately decision making by management. 

One ten wonders why cost accounting control techniques applied in recent past in production process revealed a-much-higher cost per unit and this of course could not guide the management for decision making. This trend further revealed that competition in industry is affected by a wrong utilization of cost accounting techniques. Is the formulation of company’s policy in line with ascertainment of proper accounting control technique for maximization of objectives? 

Does lack of proper accounting control technique affect quality of decision making at the strategic and operating level?

Decision in the past was taken haphazardly by management because of ignorance in the application of cost accounting control techniques. Several efforts have been made by different researchers’ overtime to solve this problem, but it persists. 

1.3 Objectives of the Study 

The main objectives of the study are to find out the problem associated with the application of cost accounting techniques for management decision making. Other objectives relating to this problem are:

i. To determine the extent to which cost accounting techniques affect management decision.

ii. To ascertain if efficiency in decision making depends extensively on effective utilization of accounting information, principles and techniques.

iii. To ascertain if cost accounting information are used in manufacturing organization. 

1.4 Research Questions      

The following research questions were formulated for the purpose of the study:

i. To what extent does a cost accounting technique affect management decision of the organization? 

ii. How does application of accounting principles and costing techniques affect management decision in an organization?

iii. Of what use are the application of cost accounting information in the effectively production in an organization? 

1.5 Research Hypotheses

i. There is no significant relationship between cost accounting techniques and management decision in an organization.

ii. There is no significant relationship between the application of accounting information, principles and cost control techniques and management decision. 

iii. There is no significant relationship between the application of cost accounting information and effective production in an organization. 

1.6 Significance of the Study 

i. The study will be of immense benefit to the organization in terms of quality decision by management.

ii. The application of cost accounting techniques will assist in reducing cost per unit of production in an organization.

iii. The study shows that application of accounting information, principles and techniques enhance efficiency

iv. The study forms as basis for future research by academicians who are confronted with this nature of problem. 

1.7 Scope of the Study 

The extent of this study is limited to the understanding of cost accounting roles in management decision of a manufacturing organization as is seen in Champion Breweries PLC, Uyo. This organization is into manufacturing service rendering. The research work will cover the importance of cost accounting principles, techniques and information as well as management decision based on those application.  

1.8 Limitations of the Study 

i. Time – The period within which the study is conducted is short for thorough research study; hence getting adequate information becomes very difficult.

ii. Lack of Co-operation from most respondents during administration of questionnaires also poses limitation.

iii. Unavailability of enough data for the problem also contributed to its limitation. 

1.9 Definition of Terms 

Decision-making: This is choosing from numerous alternatives, it involves choice. 

Accounting: One stilled in accounting work, usually professionally qualified accountant.

Management: The senior member of an enterprise who dictate and enforce policies. 

Cost Accounting: This is simply defined as the process of accounting for cost from the part of which expenditure is incurrent relationship with cost centres and cost units. 

Organization: A recognized business entity or enterprise that carry out business activities.

Manufacturing: It is just the process of making or producing goods and services either on small or large scale by using machines or through manually recommended method. 

1.10 Organization of the Study 

This section outlines chapter one to embrace background to the study; objectives of the study; research questions, significance of the study, test of hypotheses, scope and limitations of the study, definition of terms and organization of the study. Chapter two discloses the Theoretical/conceptual framework; empirical review and per iodization of existing literature on this problem. The third chapter reveals that a survey design was questionnaires distributed to staff of Champion Breweries Limited, Uyo in Akwa Ibom State. It also discloses the population, sample size, sources of data and data collection method. Chapter four unfolds data presentation, data analysis and discussion of findings. The last chapter shows the summary of findings, conclusion, recommendation, contribution to knowledge and suggestion for further studies. 



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