THE ROLE OF COST MANAGEMENT ACCOUNTING INFORMATION IN DECISION MAKING PROCESS

  • Type: Project
  • Department: Accounting
  • Project ID: ACC1681
  • Access Fee: ₦5,000 ($14)
  • Chapters: 5 Chapters
  • Pages: 118 Pages
  • Methodology: chi-square
  • Reference: YES
  • Format: Microsoft Word
  • Views: 1K
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THE ROLE OF COST MANAGEMENT ACCOUNTING INFORMATION IN DECISION MAKING PROCESS
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND OF THE STUDY
In a global market in the  in the contemporary economic environment all businesses need relevant and appropriate information quantitative as well as qualitative information which is adequate to survive and grow in a market. In current times, the market is unpredictable and dynamic in nature, the main objective of business organization is to maximize owners’ wealth or put in other words, to be profitable in the short-term as well as in the long-term.  
As discussed above, all businesses must have a management information system which may be a simple information system to a complex statistical and analytical system or decision support system.
The most important is the financial management system because all businesses have to earn profit given the3 risk of operations. The management information system or the sub component management accounting of which costing department forms a major backbone gives regular financial reports to management at all levels regarding performance measures in financial and non-financial performance criteria. This enables the organization to understand and identify weaknesses in terms of efficiency improvement and quality improvement of its products and services compare to its major competitors and suggest cost effect measures to improve organizational flexibility and innovative potential to meet competitive pressures, as well as give the organization the capacity to grow with minimum volatility in its profitability performance. The management accounting system is a cost control system as well as a tool for planning and controlling operations and suggests solutions to improve organizational efficiency and productivity of the organization as a whole.
Horngren, et al, (2000) asserts that the design of a management accounting system should be guided by the challenges facing managers. They also presented four key themes that are important to managers attaining success in their planning and control decision of which management accounting could play a key role in helping managers focus on these four themes;
(a)      Customer focus
(b)    Key-success factor which include
(i)    Quality
(ii)    Time
(iii)    Innovation
(c)    Continuous improvement
(d)    Value chain and supply-chain analysis
The study of management accounting helps us see through the eyes of those who are subject to accounting measures of performance and who often depend heavily on accounting data for guidance in decision making. There is no escaping linkage of accounting and management so the study of management will help one regardless of whether you become a manager or an accountant, or whether one will work in retailing, manufacturing, healthcare, public administration, or some other activity.
The accounting system is recognized as the major quantitative information system in almost every organization as noted by Horngren (1978). An effective accounting system provides for three broad purposes;
(i)    Internal reporting to managers for use in planning and controlling routine operations.
(ii)    internal reporting to managers for use jin strategic planning, that is, the making of special decisions and the formulations of overall policies and long – range plans; and
(iii)    External reporting to stockholders, government and other outside parties.
Both management (internal parties) and external parties share an interest in all three important purposes, but the emphasis of financial accounting and management (internal) accounting differ. Financial accounting has been mainly concerned with the third purposes and has traditionally been oriented toward the historical; stewardship aspects of external reporting.
The distinguishing feature of management accounting is its emphasis on the planning and control purposes; management accounting is concerned with the accumulation, classification and interpretation of information that assist individual executives to fulfill organizational objectives as revealed explicitly or implicitly top management (Horngren 1978).
1.2    STATEMENT OF RESEARCH PROBLEM
It will be wrong to assert that cost and management accounting system do play an effective role in decision making process in every business organization. This might be due to the fact that the accounting system could not provide adequate information needed for decision making. Weak accounting system, inexperience personnel, tools used in measuring and analyzing information could be responsible for this problem. It could also be due to the poor arrangement of the management information system or the absence of the accounting system which is seen as at the extreme case. The claim of superiority by the line manager over the accountant who is a staff manager could also be responsible for the type of decision arrived at.
 It is also not untrue that some business organization arrives at sensitive investment decision without obtaining relevant information from the relevant department.
This study stands to answer the following questions;
(i)    Is there a Costing department and Management accounting section in every business organizations?
(ii)    Do business organizations differentiate between Cost and Management accounting section within the system?
(iii)    What are the functions and roles of each of these units/departments?
(iv)    Does each of the3 departments play its role when management is to make decision?
(v)    How effective and adequate are the internal reports provided by the Cost and management accounting to the management team?
(vi)    Have firms in Benin City fully appreciate the use of Activity Based Costing (ABC) system as a costing tool?
(vii)    Is there at all any advantage to be derived from employing ABC system?
(viii)    Do Managers request for Cost and Management accounting information before taking related decisions?
1.3    OBJECTIVES OF THE STUDY
The aim of this research work is to determine the role and function played by cost and management accounting in decision making process in a business organization. This can be achieved by examining the a as stated below;
(i)    To investigate the existence and operation of Management accounting system as a whole and Costing department in particular in a business organization.
(ii)    To enlighten the manufacturing and service firm owners on the importance of and the need to improve on their management accounting system
(iii)    To facilitate better understanding of how cost information is obtained, classified, analyzed and applied in decision taking.
(iv)    To ascertain the existence and use of Activity Based Costing system by business organization.
(v)    To establish if there is any relationship between profit and critical analysis of cost information.
1.4    SCOPE OF THE STUDY
This study will cover both short and long term quantitative decisions made in a business environment and how management accounting system is able to provide necessary information to assist in the decision making process. Non – quantifiable decisions made in a business environment are not covered in this study because such decisions are not completely objective.
The site of this study is Benin City and the objective of study is manufacturing firms within the metropolis. A total of twenty firms are taken as our sample size and the selection method is non-probability convenient method.
 1.5    SIGNIFICANCE OF THE STUDY
With the wave of galloping inflation which translates to high cost of resources sweeping the national economy, it is obvious and pertinent for a business organization operating in this volatile environment to have in place mechanism that could counter this mess and make the business to stand out among its competitors. One of the ways of achieving this is when the business is consciously informed of the best alternative before engaging in “to hold, buy or sell decision”. Cost and management accounting system come in to play in such circumstances as it provides relevant and reliable information for the above purposes. Hence, this study will be of immense significance to both small, medium and large business enterprise. This study will also pave way to future researchers interested in this line of thought.
1.6    RESEARCH HYPOTHESES
For the purpose of this study, the following research hypotheses will be considered and tested.
(i)    H1: Business organizations have and maintain a separate Costing     department.        
H0:  Business organizations do not have and maintain a separate Costing department.
(ii)    H1: Management relies on cost accounting information before making decision.
H0: Management does not rely on cost accounting information before making decision.
(iii)     H1: Business organizations operate and maintain activity based costing as an aid to internal decision making.
H0: Business organization does not operate and maintain activity based costing as an aid to internal decision making.
(iv)    H1: Activity based costing system has been an effective tool to aid management decision making.
H0: Activity based costing system has not been an effective tool to aid management decision making.
1.7    LIMITATIONS OF THE STUDY
The major limitations encountered in the process of writing this project work include the following:
1.    The sample size: It was recognized that the sample size selected were not large enough to represent manufacturing firms in Benin City.
2.    Sampling method: Convenience method which is a non-probability sampling method which is often subjective, also serves as a limitation to this study.
3.    Policy of the respondent companies: Some of the  corporate culture of the properly attended to perhaps, in order not to encroach to the corporate culture of the firm.
4.    Working environment and time limit: Inability to source for more and current information both from the internet and library and also the prolong ASSU strike which translated into a very limited time to work with, altogether serve as limitations.

THE ROLE OF COST MANAGEMENT ACCOUNTING INFORMATION IN DECISION MAKING PROCESS
For more Info, call us on
+234 8130 686 500
or
+234 8093 423 853

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  • Type: Project
  • Department: Accounting
  • Project ID: ACC1681
  • Access Fee: ₦5,000 ($14)
  • Chapters: 5 Chapters
  • Pages: 118 Pages
  • Methodology: chi-square
  • Reference: YES
  • Format: Microsoft Word
  • Views: 1K
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    Details

    Type Project
    Department Accounting
    Project ID ACC1681
    Fee ₦5,000 ($14)
    Chapters 5 Chapters
    No of Pages 118 Pages
    Methodology chi-square
    Reference YES
    Format Microsoft Word

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