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PROJECT TOPIC- BUDGETING AS AN INSTRUMENT OF INTERNAL CONTROL IN A MANUFACTURING ORGANIZATION (A CASE STUDY OF AMA BREWERIES ENUGU)

BUDGETING AS AN INSTRUMENT OF INTERNAL CONTROL IN A MANUFACTURING ORGANIZATION
(A CASE STUDY OF AMA BREWERIES ENUGU)

ABSTRACT
An efficient budgeting control system is one that produces the desired result. A balanced budget is the one that produces no variances but to achieve this, we are left to contemplation rather than a reality. This has become the problem of most of our manufacturing concerns in Nigeria. This study investigated the budget control and execution in manufacturing concerns in Nigeria with a view of appraising their efficiency.

Out of a population of one hundred and fifty six drawn from the manufacturing concern, seventy eight were selected as the sample size using statistical sample tools (Taro Yamani). A questionnaire was designed and distributed to elicit information from the sample population; also data was sourced through primary and secondary sources. These data collected were presented and analyzed by means of tables and percentages.

The hypotheses adduced were tested using such tools as chi-square. It was observed that manufacturing concerns do plan their profit so as to minimize losses though the procedure is not religiously carried out. However, it was discovered that the procedure is inadequate and inefficient. An inadequate budget procedure and execution causes a high accumulation of inventory thereby tying down the capital which could have yielded greater profit to the organization.

Therefore there is need for the proper control of budgets in manufacturing concerns as to minimize losses and maximize profits.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

According to Enudu (1999), the business environment is characterized by a lot of uncertainties ranging from such factors as: Economic environment, political and legal factors, social environment, supply and demand forces, competition, consumers’ attitude and technological changes. A critical look at the performances of some of these manufacturing business organizations will reveal a lot of business failures as a result of lack of proper planning against these uncertainties. According to Drury (2000), proper planning of business helps in reducing uncertainties thereby providing the management of these enterprises with a clear direction by determining their courses of actions in advance.
According to Pandey (2010), for any enterprise to achieve these goals and objectives, they must be managed effectively and efficiently. Management is efficient if it is able to accomplish the objectives of the enterprise and becomes effective when it accomplishes the objectives with minimum efforts and costs. One of the ways in which the management can achieve these objectives is though profit planning and control or budgeting.

According to Nweze (2011), Budgeting in its true word is the design of the future state of an entity and the effective ways of bringing it about. Budgeting or planning involves the determination of the future course of actions for accomplishing the objectives of the enterprise. According to Lucey (2002), the main purpose of budget planning is to provide the necessary guidelines for making decisions.

With the proper budget planning, the enterprise can no longer be under the mercy of whims of Fickle economic and social forces thereby relying on the ability to sense what is required. (Nweze 2011). The value of budgeting control of any organization can never be over-emphasized as these organizations and companies have limited resources and these scarce resources impose limits on the number of extent and range of end result the organization was set out to achieve. According to Nwoha and Ekwe (1999), some of these goals include maximizing profit or achieving some satisfactory level of performance, profit satisfaction achieving continual growth or ensuring the survival of the organization avoiding risk in making investment and performing a social services desired by others.
According to Nweze (2011), A budget therefore co-ordinates the separate plans of different departments in an organization be it manufacturing concerns or non-manufacturing concerns and provides means of bringing both the
marketing, production and financial activities of the organization together.
The proper co-ordination of the various activities of these organization especially manufacturing concerns by their management is the main concern of this study.

BUDGETING AS AN INSTRUMENT OF INTERNAL CONTROL IN A MANUFACTURING ORGANIZATION
(A CASE STUDY OF AMA BREWERIES ENUGU)

 

1.2 STATEMENT OF THE PROBLEM

Having stated earlier according to Enudu (1999) that the business environment is full of uncertainties as a result of such factors; socio-economic issues, political unrest, demand and supply forces, legal issues and technological changes all these affect the management of any organization in one way or the other thus needed attention for proper management.
You would equally recalled that organizational goals and objectives are numerous but the means or resources for satisfying these needs are limited, at times not available hence needed control to satisfy the high priority areas.
These problems enunciated above have led the researcher to find answers to such questions as follows:-
 Do manufacturing companies in Nigeria do Budgeting?
 If they do, what are the types of budgeting usually employed by them?
 The type used or applied does it enhances their profit planning strategies?

1.3 OBJECTIVES OF THE STUDY

According to Pandey (2010), Budgeting was undertaking with the following objectives in mind.
 To find out whether or not manufacturing business organizations control their levels of profit making and the means used to achieve this.
 To examine whether the manufacturing business concerns in Nigeria plans their profits hence their losses are unnecessarily large in relation to their budget estimate
 To identify the types of budgeting in some of the manufacturing business concern in Nigeria that enhance efficiency

1.4 RESEARCH QUESTIONS

 Does the manufacturing business organization control their levels of profit making and the means used to achieve it
 Does manufacturing business concerns in Nigeria plans their profit hence their losses are unnecessarily large in relation to their budget estimate
 Does the types of budgeting in some of the manufacturing business concern in Nigeria enhance efficiency

1.5 HYPOTHESES OF THE STUDY

To identify the achievements of the desired objectives, the following hypotheses are formulated:
H0: Represents Null Hypothesis
H1: Represents Alternate Hypothesis

HYPOTHESIS I

H0: Manufacturing business organization do not control their levels of profit making and the means used to achieve it
H1: Manufacturing business organization do control their levels of profit making and the means used to achieve it

HYPOTHESIS II

H0: Manufacturing business concerns in Nigeria do not plan their profit hence their losses are unnecessarily large in relation to their budget estimate.
H1: Manufacturing business concerns in Nigeria do plan their profit hence their amount of losses are not unnecessarily large in relation to their budget estimate.

HYPOTHESIS III

H0: The type of budgeting in some of the manufacturing business concern in Nigeria is not efficient.
H1: The type of budgeting in some of the manufacturing business concern in Nigeria is efficient.

1.6 SIGNIFICANCE OF THE STUDY

According to Nweze (2011),

BUDGETING AS AN INSTRUMENT OF INTERNAL CONTROL IN A MANUFACTURING ORGANIZATION
(A CASE STUDY OF AMA BREWERIES ENUGU)

 

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