CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Prices of goods and services are gradually increasing day by day and due

to the fact that the sole aim of a businessman producer or manufacturer is to

make profit they end up making use of low quality materials for production so

as to reduce cost of production and maximize profit. Moreover with the

increase of competitors around most of the producers have thought it wise to

manufacture or package a quality product and also enhance their profit level.

This elevated the interest of the researcher to bring to light of how this goal can

be achieved through intensive study of the role of management accountants to

cost control and profit performance in an organization. Apart from cooperate

scandals; there has been anosmatic pressure for better profit maximization as

the business environment became more volatile prices of products increasing at

an alarming rate and the production of low quality products.

In the past management accountants operation is strictly on workers

capacity usually separated from the managers for whom they provided reports

and information. But in this present period management accountant now serve

as internal business consultants. Working together in cross functional teams

with managers from all sectors of the organization.

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However the management face a broad array of decisions including

production marketing financial and other relevant decisions. Also having in

mind that decision making is a fundamental part of management; the

management accountant must be equipped with some knowledge of accounts

and management. He must have an understanding and knowledge of the

environment and the operations of the organization in which those systems are

implemented and appropriate technology to apply in each case for the provision

of management information. It is obvious that the management of a

manufacturing firm will need information that will enable them consider the

factors affecting cost of production cost reduction product pricing and

investment etc so as to choose the best alternative.

1.2 STATEMENT OF THE PROBLEM

In recent years the cost of products manufactured in Nigeria has been very

expensive beyond the reach of common Nigerians. This cost challenges has

made many products manufactured in the country unpatronized by the

consumers and as a result of that expires in the hands of the sellers. There is

also a problem of poor inventory management which leads to overstocking

thereby tying down the company‟s working capital. Another problem facing

some or most of the manufacturing firm is the installation of improper plan to

reduce cost of production so as to maximize profit i.e. ( making use of low

quality raw material).

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Management accountants are assigned with managing cost elements of

products among other responsibilities. He aligns cost with efficiency; provide

required information for cost minimization so that profit could be maximized.

These assignments should reduce product pricing but instead there have been a

consistent product price racketing. These problems therefore brought the need

for this research work which intends to find the reason for this persistent

increase in product pricing where the services of management accountants were

engaged and therefore putting up the following questions:

Do management accountants perform in their responsibility?

Is cost performance inefficiencies of management accountants included in the

product pricing?

Is the recent in price caused by other factors rather than elements of cost of

production managed by management accountants?

How would the role of management accountant in an organization improve

profit performance?

1.3 OBJECTIVES OF THE STUDY

1 To determine the relevance of management accountant in an organizational

internal cost performance efficiency.

2 to ascertain whether the resent increase in cost of products manufactured in

Nigeria is caused by other factors rather than management inefficiency.

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3 To ascertain if organizational strategic managers should rely on management

accountant information for decision making.

4 To make recommendations based on the findings.

1.4 RESEARCH QUESTIONS

To what extent is management accountant still relevant in organizational

internal cost performance efficiency?

Does the resent increase in cost of products manufactured in Nigeria caused by

other factors rather than management accountant inefficiency?

To what extent should strategic managers rely on management accountant

information for decision making?

1.5 FORMULATION OF HYPOTHESIS

The following hypothesis was formulated for this research work.

Hypothesis 1

H0: management accountant is not relevant in organizational internal cost

performance efficiency

H1: management accountant is relevant in organizational internal cost

performance efficiency.

Hypothesis 2

H0: resent increase in cost of products manufactured in Nigeria is not caused by

other factors rather than management accountant inefficiency.

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H1: resent increase in cost of products manufactured in Nigeria is caused by

other factor rather than management accountant inefficiency.

Hypothesis 3

H0: organizational strategic managers should not rely on management

accountant information for decision making.

H1: organizational strategic managers should rely on management accountant

information for decision making.

1.6 SIGNIFICANCE OF THE STUDY.

The management accountant makes the necessary information available to the

management by the application of his skill and knowledge. The significance of

this study is to bring to the notice of the management the exemplary role of the

management accountant and the technique he uses to provide information and

also how these would affect the operations and the attainment of the

organizational goal if these information provided are not recommended for use

by the management. And with such knowledge and information put to use

management would be able to plan and control the organization such that the

cost of operating the business will be at a minimum while profit will be

maximized.

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And if the profit objective is achieved the customer will benefit from

better and cheaper product while the investors will benefit from the profit as

well.

1.7 SCOPE OF THE STUDY

The study is limited as it looks at the role of management accountants to cost

control and profit performance in an organization. A case study of INNOSON

Company Nigeria limited Emene Enugu. This research work intends to cover:

1. How managerial accountants should be able to adapt their generalized

knowledge of accounting to develop customized data and report that are logical

and support sound management process.

2. The reporting structure is well defined and standardized.

3. The methods of preparation of information and the report presented are

governed by rules.

1.8 LIMITATIONS OF THE STUDY

In the process of carrying out this research work the most nagging problem

facing the study is how to obtain reference materials. The time to carry out the

research is short and insufficient since it is done alongside with some other

courses to contend with so as to present a good result. There are also difficulties

associated with personnel‟s accepting to give vital information which will be of

help to the researcher.

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1.9 DEFINITION OF TERMS

Accountant: An accountant is a practitioner of accountancy or accounting (

referred as an accounting in the united states) which is the measurement

disclosure or provision of assurance about financial information that helps

managers investors tax authorities and others make decisions about allocating

resources.

Management Accountant: are those key officers that provide business data and

analysis to managers within organizations to assist in decision making and

control.

Profit maximization: A process that companies undergo to determine the best

output and price levels in order to maximize its return. The company will

usually adjust influential factors such as production costs price of goods and

output level as a way of reaching its profit goal.

Performance; General accomplishment of a given task measured against present

standards of accuracy completeness cost and speed.

Management;: this is defined as the process of dealing with or controlling things

or people. It is the responsibility for control of a company or similar

organization.

Company: this refers to a legal entity that carries out business in its name.

Information: this means data that is accurate and timely specific and organized

for a purpose presented within a context that gives it meaning and relevance

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and can lead to an increase in understanding and decrease in uncertainty.

Information is valuable because it can affect a decision or an outcome. For e.g.

if a manager is told his company‟s net profit decreased in the past month he

may use this information as a reason to cut financial spending for the next

month.

Decision making: the thought process of selecting a logical choice from the

available option. It is done to achieve a specific objective or solve a specific

problem

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