Académique Documents
Professionnel Documents
Culture Documents
BY
DEPARTMENT OF ACCOUNTANCY
FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA, ENUGU CAMPUS
NOVEMBER 2008
BY
DEPARTMENT OF ACCOUNTANCY
FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA, ENUGU CAMPUS
NOVEMBER 2008
CERTIFICATION
This is to certify that Obeta, Ngozi Joy
is a postgraduate
..
Supervisor
Head of Department
Date: ..
Date:
DEDICATION
ACKNOWLEDGEMENT
ABSTRACTS
TABLE OF CONTENTS
PAGE
Title Page .
Certification ...
ii
Dedication ..
iii
Acknowledgement
iv
Abstract ..
Table of Contents .
vii
CHAPTER ONE:
1.0. Introduction .
1.1
1.2
Statement of Problems .
1.3
1.4
Research Questions .
1.5
Statement of Hypothesis .
1.6
Significance of Study
1.7
1.8
Limitations of Study ..
1.9
Definition of Terms
10
References
11
CHAPTER TWO:
LITERATURE REVIEW
2.0
12
2.1
Cost Accounting.
17
18
Production Capacity/Volume
21
2.2
22
2.3
Operating Leverage
23
2.4
Ascertainment of Profit
26
2.5
26
29
2.6
31
2.7
35
2.8
2.9
Analysis ..
39
41
41
41
44
References
51
CHAPTER THREE:
3.0
53
3.1
Sources of Data
53
53
53
3.2
Method of Investigation ..
54
3.3
55
3.4
55
3.5
Analytical Techniques
56
CHAPTER FOUR:
4.0
57
4.1
Analysis of Responses
57
4.2
Test of Hypothesis
64
CHAPTER FIVE:
5.0
73
5.1
Summary of Findings ..
73
5.2
Recommendations ..
75
5.3
Conclusion
76
5.4
77
Bibliography .
78
Appendix ..
80
10
CHAPTER ONE
INTRODUCTION
1.1
11
[b]
[c]
[d]
12
[a]
[b]
[c]
[d]
altering
plant
layout,
channels
of
distribution
the
practical
there
is
no
doubting
Capacity
[b]
Variable Cost
[c]
Fixed Cost
[d]
13
1.2
STATEMENT OF PROBLEMS
Due to the state of our economy and the various governmental
14
[b]
[c]
[d]
[e]
1.4
RESEARCH QUESTIONS
The research question which at the end of this work would have
[b]
[c]
What product mix decision must a firm take in case of a multiproduct firm?
15
[d]
1.5
STATEMENT OF HYPOTHESIS
Based on the statement of the problem, objectives and
2.
Cost Control [i.e. Cost Volume Profit] technique will not help
to develop and expand manufacturing Industries as well as not
resulting to high profitability.
3.
1.6
[b]
[c]
16
[d]
[e]
1.7
LIMITATIONS OF STUDY
Research project in a developing nation like Nigeria is still
17
[a]
[b]
1.9
Cost:
DEFINITION OF TERMS
Cost simply means the resources used up in achieving a
18
REFERENCES
Jack, L.S.; M.K. Robert and L.S. Williams [1988], Managerial
Accounting, McGraw-Hill Book Company, U.S.A.:129 13, 2nd
Edition.
Jhingan, M.L. & J.K. Stephen [2007], Managerial Economics,
Vrinda Publication Ltd, Delhi: 653, 3rd Edition.
Richard, M.S. & F.C. Wai [1991], Managerial Accounting Method &
Meaning, Chapman & Hill, London: 109, 3rd Edition.
Ricketts, D & G. Jack [1991], Managerial Accounting,
Houghton miffin Coy, U.S.A. 223, 2nd Edition.
19
CHAPTER TWO
LITERATURE REVIEW
2.0
[ii]
Manipulate Volume
20
21
three different ways in which cost behaves viz: Variable, fixed and
mixed or semi-variable.
[a]
Variable Cost:
the cost of raw materials and the direct cost of converting the raw
materials. The cost increases or decreases in a proportionate manner
but arbitrarily. These are costs that vary in total accounting to
changes in output. Example of Variable Cost includes: direct labour,
material, energy costs, packaging sales commissions, etc.
The behaviour of total cost with respect to relevant range of
output is shown in a table and graph form.
Table 2.1 Variable Cost schedule
ITEM IN UNITS Q
10
10
10
10
100
20
10
200
30
10
300
400
300
200
100
10
20
30
40
[volume]
22
[b]
Fixed Cost: It is Cost that does not vary in total amount as sales
1000
1000
10
100
1000
20
50
1000
30
25
1000
Total Cost
N
1000
Fixed Cost
0
1
Figure 2.2:
Quantity
10
20
30
40
23
Fixed Costs occurs as long as the selling price per unit exceeds the
Variable Cost per unit. This helps to explain why some firms will
operate a plant even when sales are temporarily depressed, that is to
provide some increment of revenue towards the coverage of Fixed
Cost.
[c]
that are neither strictly fixed nor strictly variable. It will be strictly fixed
and at a point, it will be variable and it will be strictly variable and at a
point it will be fixed. It is difficult to analyze mixed
cost but in doing so, add the total fixed cost and trace that point up to
the point where it varies and add to that total variable.
N
cost
24
COST ACCOUNTING
Owler and Brown [1984:1] defined Cost accounting as that part
25
26
[b]
numerous
conventions
and
assumptions,
that
any
Cost Units:
Cost unit is that unit of output, service or time to which costs
27
Cost Centre:
This is any part of a form to which it is convenient to give up
28
29
PRODUCTION CAPACITY/VOLUME
Production capacity/volume is defined as the maximum level at
[b]
[c]
Material:
[i]
Availability of supply
[ii]
Labour:
[i]
General shortage
[ii]
Plant:
[i]
[ii]
30
[iii]
d]
Management:
[i]
[ii]
[e]
Sales:
[i]
Consumer demand
[ii]
[i]
[i]
Labour intensive
[ii]
Capital intensive
Labour Intensive:
Firms can make use of human labour in their production
Capital Intensive
Conversely, in capital intensive mode of production, the firm
31
OPERATING LEVERAGE
To the manager, leverage explains how one is able to achieve
32
Q [SP VC]
Q [SP VC] FC
Gross profit
EBIT
33
N12.00,
B = N10.00 and
C = N9.00.
Solution:
Bu
F
SV
Bu [A]
5,000
5,000
15-12
1,666.67 units
1,400 units
Bu [A]
Bu [B]
7,000
15-10
7,000
5
34
Bu [B]
1,400 units
Bu [C]
8500 =
8,500
15-9
Bu [C]
1,416.67 units
This shows that for the firms to break even, A firm have to sell
1,667 radio sets, B firm will have to sell 1,400 radio sets, while C
firms will have to sell 1,417 radio sets.
2.4
ASCERTAINMENT OF PROFIT
Profitability is a primary measure of the overall success of a
Total revenue
Total Cost.
Both total revenue and total cost are likely to be affected by changes
in the quantity of output. A statement of the profit equation that takes
quantity of output into account adds useful information for examining
the effects of revenue, cost and volume on operating profit.
35
2.5
36
[b]
Total sales
revenue
400
BEP
300
Profit
Loss
Total Cost
200
A
Fixed Cost
100
BEP
Sales Volume
37
38
states the amount by which sales can drop before losses begin to be
incurred in an organization.
The formula for its calculation:
Total Sales Breakeven Sales
Margin of Safety
MS in percentage
Total Sales
It can also be expressed in terms of units of product [if a
company is a single product firm] by the formula:
MS in Naira
Unit Selling Price
If the margin of safety [ms] is low, management effort must be
directed toward reducing the breakeven point or increasing the
overall level of sales in the company margin of safety is a tool
designed to point out a problem, the solution to which must be found
by analyzing the Company Cost Structure and by applying the
general Cost Volume Profit technique.
Kodjo [lecture note] also observed that the breakeven point signal the
beginning of the danger zone. The further away a firm is from the
breakeven point, the more comfortable it will be. The margin of safety
is the different between the firms actual output achieved and its
breakeven output where the firm is producing above the breakeven
point, it measures by how much an output will fall before there is no
more profit, that is, before the entire profit is wiped out. For this
39
reason, it is considered that the wider the margin of safety, the more
comfortable the firm will be.
Mathematically: Margin of Safety + Contribution Margin = Profit
He also observed that margin of distress which means the
amount of additional volume that must be achieved before the
enterprise wipes out all losses and breakeven measure the amount of
unit and Naira Sales Volume respectively, that must be achieved
before the enterprise get out of its distress.
When a firm finds itself producing at a point below the
breakeven point, the firm must be making a loss; in that case, we say
that the firm is in distress. It is possible to measure the extent of
distress. It is the difference between the actual output of the firm
[which is below the BEP] and the breakeven point. It shows by how
much output must increase before the entire loss will be wiped out
and the firm break even.
The margin of the firm in distress will do well to keep the margin
of distress in focus this way he can chase it as a target.
To get out of distress, the management could seek to
manipulate its unit contribution margin to advantage where possible.
Conversely anything that tampers with the contribution margin in unit
to a disadvantage has the potential of adversely affecting the margin
of safety.
2.6
between sales and total variable costs. It is not the same as gross
40
margin which is the difference between sales and total cost of goods
sold [including fixed cost]. The relevance of the contribution margin is
that under certain short term conditions it becomes critical for
management to know what productive effort are making towards the
recovery of those costs which, because they are fixed, are known to
be unaffected by changes in production levels. These conditions are
very many indeed and include decisions to drop product lines,
change prices, choose alternative product route etc. also under
condition where some resources impose constraints on decision by
reason of their importance or relative scarcity, the contribution
approach to the decision is helpful. Under any or all of these
conditions [mainly short-term] fixed cost largely unaffected and are,
therefore, unimportant in making the decision.
Where sales and variable costs are determined on unit basis
the contribution margin, which is then per unit, now conforms to what
the economics refer to as marginal income, in which case the
optimum volume of production is determined at where marginal cost
and marginal revenue are equal, and the price at which this volume is
obtained is the optimum price.
Nweze [200:161] also stated that the assumptions underlying
the contribution margin concept includes:
[a]
[b]
Total revenue that the trader will make will be equal to the
Total revenue
41
Note that, C
Where C
V + F - - - [I]
V =
Where v
quantity
Vq - - - - - - - - - [2]
Then R
Where R
rxq=
rq - - - [3]
P _ - - - [4]
= V +
+
F]
P - - - [5]
42
the price of the product. The accumulation of this margin per unit into
the total units achieved equals the total cumulative margin. The
margin provides a fund for achieving two important business
objectives.
[a]
[b]
43
Reduce his Variable Cost while ensuring that fixed cost and
price remain constant or decrease more slowly.
[b]
Increase price, while ensuring that Variable Cost [and also fixed
cost] do not increase or do so more slowly.
[c]
[d]
[a]
[b]
[b]
44
can any profit is made at all. It is only by achieving volumes [of sales]
that these targets can be attained.
To improve performance, management should focus its
attention on the contribution margin. Once revenue outstrips Variable
Costs, there is a contribution made to this fund from which static
fixed cost and profits are satisfied.
2.7
[b]
[c]
[d]
[e]
Percent
Sales price
250
100
150
60
Contribution margin
100
40
45
[a]
52,000
40,000
12,000
10,000
2,000
46
which would reduce Variable Costs by N25 per oven. However, the
sales manager products that the lower overall quality would reduce
sales to only 350 ovens per month. Should the change be made?
Solutions:
The N25 decrease in Variable Costs will cause the contribution
margin per unit to increase from N100 to N125.
N
Expected total contribution margin
350 ovens x N125
43750
40000
3750
47
Solution:
A decrease of N20 per oven in the selling price causes the unit
contribution to decrease from N100 to N80.
N
Expected total contribution margin
400 ovens x 150% + N80
48,000
40,000
8000
15000
[7000]
currently selling 400 ovens per month. The sales manager would like
to place the sales staff on a commission basis of N15 per oven sold
rate than on flat salaries that now total N6,000 per month. The sales
margin sales by 15 percent. Should the change be made?
Solution:
Changing the sales staff from a salaries basis to commission
will affect both Fixed and Variable costs. Fixed Cost decrease by
N6000 from N35000 to N29000. Variable Cost increase by N15 to
N165 and the unit contribution margin decrease from N100 to N85.
N
Expected total contribution margin
400 ovens x 115% xN85
39,100
48
40,000
[900]
6000
5100
ASSUMPTIONS
UNDERLYING
COST-VOLUME-PROFIT
ANALYSIS
Cost Volume Profit analysis is a technique that helps
management in decision making. It merely provides information that
management can analyze and use to make its final decision. Certain
assumptions underlie Cost Volume Profit analysis. The data that
result from the analysis are only as valid as these assumptions. As
long as management understands the assumptions, it can adjust its
final data to meet the actual situation under study.
Nweze [2004: 224] made the following Cost Volume Profit
analysis assumptions:
[a]
49
[b]
50
we assume that inventory levels do not change, so that all fixed Costs
are subtracted from the contribution margin in arriving at net income.
Cost Volume Profit analysis is only as valid as the
assumptions that underline it. Management must consider these
basic assumptions. To the extent that any assumption is not valid in a
specific situation, management must adjust its data to meet the
realities of the situation.
Cost Volume Profit analysis is a useful technique for
management. It must be remembered, though that appropriate
information, management can have more confidence in a decision
based on the data that result from Cost Volume Profit analysis.
2.9
Fixed Cost
Contribution/unit
[b]
[c]
[d]
[e]
51
[f]
[b]
52
53
54
55
[a]
N1,50,000
Volume of sales =
N500,000 unit
PRICE
VARIABLE
PER UNIT
COST
UNIT
SHARE
IN
PER SALES
VOLUMES
[%]
Roofing product
360
240
50
Ceiling product
600
360
30
Garden items
800
480
20
56
N1,50,000
N500,000
PRICE
VARIABLE
SHARE IN
PER UNIT
COST PER
SALES
UNIT
VOLUMES
[%]
Roofing products
360
240
50
Ceiling product
600
360
20
850
450
30
Contribution Ratio
=
0.167
57
Ceiling product
0.12
0.08
600
Garden items
0.367
N500,000 x 0.367
N183,500
N183500 N1,50,000 =
N33500
Contribution Ratio
Roofing product
0.167
0.08
0.141
360
Ceiling product
0.388
=
N300,000 x 0.388
N194,000 N1,50,000
N194,000
N44,000
58
[b]
idle facilities. The choice to prefer will be the one to increase the
contribution margin or the one that will reduce the total cost.
When an enterprise faces the decision to purchase from an
outside supplier, a product/component that it has the capacity to
make within the enterprise is said to be faced with a make-or-buy
decision.
In making this decision, a lot of factors, qualitative and
quantitative come into play in making such decisions. There may
be the concern to ensure a steady uninterrupted supply, or for the
reduction of dependence on outside suppliers, there may be the
desire to free facilities for more strategic use, there may also be a
consideration for costs. However, the analysis here will be restricted
to qualitative factors since such is the practice of accounting.
Illustration II:
Suppose Emenite, a manufacturer of Roofing products
considers sub-contracting the vitta tile sheets to an outside supplier
Innoson Nig. Plc, although it can make it in its factory at the following
cost.
59
COST PER
UNIT
Direct material
TOTAL COST
FOR 100,000
UNITS
100,000
Direct labour
400,000
200,000
400,000
Total Cost
Nil
N1,100,000
Make
Buy
Make
Direct materials
100,000
Direct labour
400,000
20,000
Purchase cost
N10
N7
N10
Buy
1,000,000
N700,000 N1,000,000
[N10 N7]
making
Source: An unpublished maerial from Emenite Nig. Ltd.
60
Decision:
Emenite will save N3.00 per unit or a total of N300,000 if it
made the component rather than buy it. This is because; the fixed
factory overhead of N4.00 irrelevant to the decision since it will be
incurred whether or not the component is made within.
[c]
61
lustration III:
Suppose Emenite makes two products Duraceil and Emlux with
the following data:
Table 2:7: Decision Regarding Scarce Resource
DURACEIL
EMLUX
Selling price
N40
N60
Variable expense
N32
N42
Contribution margin
N8
N18
1,000
EMLUX
N8
N18
N24
N18
N24000
N18000
62
Decision:
Although Emlux has a higher contribution margin per unit, it has
a lower contribution margin per unit of limiting factor [hours] than
Duraceil. It is better, therefore, to employ the limited time in producing
only Duraceil product.
63
REFERENCES
Ezeugwu, V.U. [1999], Intermediate Accounting, Cost and
Management, Hugotez publication, Enugu:1, 1st Ed.
Jhingan, M.L. & J.K. Stephen [2007], Managerial Economics, Vrinda
publication Ltd. Delhi: 68, 3rd Edition.
Kodjo, S.N. [Lecture Note], Managerial Accounting
Kodjo, S.N. [2004], Decision Accounting for Managers,
Oketek publishers, Enugu : 127, 1st Edition.
Keen, R. [1992], Managerial uses of Break-Even Analysis, Journal of
Management Issues, Winter,17[1] December:10 27.
Lucey, T. [1992], Management Accounting, progressive
Printers, UK: 7, 3rd Edition.
Morse and Roth [1986]; Cost Accounting Processing, Evaluating
And Using Cost Data, Addison Wesley Publishing, USA: 309,
3rd Edition.
Nweze, A.U. [2004], Quantitative Approach to Management
Accounting, Computer Edge publisher, Enugu: 212, 4th Ed.
Nwude, C. [2001], Basic Principle of Finance Management,
Eldemak publishers, Enugu: 80, 1st Edition.
OP. Cit: 218
OP. Cit : 161
Owler, L.W.J. & J.L. Brown [1984], Weldons Cost Accounting,
Pitman publishers, London: 1, 15th Edition.
Patric, E.E. [2002], Corporate Finance Management, Bureau of
Education Sciences, African: 498, 3rd Edition
Pierre, L.T. [1987], Management Accounting, USA:
The Dryden Press, A Division of Holt Pine hart and Wington
64
65
CHAPTER THREE
3.0
the researcher in the data collection for the study. The data collected
involves primary and secondary sources. The case studies are:
Emenite Nigeria Limited, Innoson Technical and Industrial Company
Ltd. and Hardis & Dromedas Ltd., Enugu
3.1
SOURCES OF DATA
The researcher of this work made extensive use of the different
sources of data collection. For this purpose data were collected from
both the primary and secondary sources so as to present a more
objective view in the end.
3.1.1 PRIMARY DATA
Primary data collected evaluated the use of personal interview
schedules. Appropriate questions were drawn up and asked during
the interview. Questions were drawn up in such a way that they were
general and specific in nature. Moreover, the primary data collected
involved
the
examination
of
the
available
records
of
the
organizations.
3.1.2 SECONDARY DATA
Secondary data covers the data which might have been
previously published and which might have been existing before the
need for this study. In order words the data are not specifically meant
for this particular study but have been found to be relevant by the
66
METHOD OF INVESTIGATION
The instrument used in the collection of relevant data were
67
Enugu and Hardis & Dromedas Ltd., Hardis & Estate, Airport Road,
Emene, Enugu.
Emenite consist of top officials of some departments and the
workers in the production unit and sales unit, which totals one
hundred and fifty five [155] workers.
While Innoson Nigeria Ltd., consist of top officials of some
departments and the workers in the production unit and sales unit,
which totals ninety five [95] workers.
Finally, Hardis & Dromedas Ltd., consist of 60 workers in both
the production and sales unit. The production of these companies is
three hundred and ten [310] workers.
3.4
Formula:
N
1 + N [E]2
Where :
S
Population size
310
Error of Margin
10%
N
1 + N [e]2
310
1 + 310[0.1]2
68
310
1 + 310[0.1]
310
1 + 3.1
310
4+1
75.6
76 workers.
60
155 x 60
310
3.5
18 workers
12 workers
60 x 60
310
30 workers
95 x 60
310
ANALYTICAL TECHNIQUE
The percentage method was used to analyze the questionnaire.
69
CHAPTER FOUR
4.0
ANALYSIS OF RESPONSES
NO OF
PERCENTAGE [%]
RESPONSES
Yes
60
100%
No
Total
Source:
60
Data from field survey
70
NO OF
PERCENTAGE [%]
RESPONSES
Yes
56
93.33
No
6.67
Total
60
100
Source:
multi-product
company,
which
represents
93.33%.
NO OF
PERCENTAGE
RESPONSES
[%]
20
33.33
28
46.67
Scarce resources
10
16.67
3.33
Total
60
100
Sources:
71
The table shows that 20 or 33.33 of them have the view that it
is make or buy decision that they take to achieve maximum profit, 28
or 46.67 says that it is add or drop decision, 10 or 16.67 agree that
their firm take scarce resources while the remaining 2 say it is all of
the above options.
Table 4.1.4:
OPTIONS
NO OF
PERCENTAGE [%]
RESPONSES
At breakeven
15
25
Above breakeven
45
75
Below breakeven
60
100%
Total
Source: Data from field survey.
The table represents how their profit margin is for the last five
years. The respondents to at breakeven are 15 which represent 25%.
45 respondents indicated that it is above breakeven which represent
75% while no respondent adopted below breakeven.
Table 4.1.5. Is inflation in the country affects the production and
quality of their product?
OPTIONS
NO OF
PERCENTAGE [%]
RESPONSES
Yes
45
75
No
15
25
Total
60
100
72
NO OF
PERCENTAGE [%]
RESPONSES
Yes
40
66.67
No
13.33
Total
12
20
Total
60
100
Source:
NO OF
PERCENTAGE [%]
RESPONSES
Yes
50
83.33
No
10
16.67
Total
60
100
Source:
73
NO OF
PERCENTAGE [%]
RESPONSES
Yes
41
68.33
No
19
31.67
Total
60
100
Source:
NO OF
PERCENTAGE [%]
RESPONSES
Yes
42
70
No
21
35
Total
60
100
Source:
74
NO OF
PERCENTAGE [%]
RESPONSES
Equation Method
40
66.67
Graphical Method
20
33.33
Total
60
100
Source:
NO OF
PERCENTAGE [%]
RESPONSES
Marginal Costing
35
58.33
Absorption Costing
20
33.33
8.33
Total
60
100
Source:
75
NO OF
PERCENTAGE [%]
RESPONSES
Yes
46
76.67
No
8.33
Dont know
15
Total
60
100
Source:
76
Table 4.1.13.
The response as to the method of Cost Volume Profit
analysis their company use.
OPTIONS
NO OF
PERCENTAGE [%]
RESPONSES
Equation Method
20
Graphical Method
40
66.67
Total
60
100
Source:
33.33
NO OF
PERCENTAGE [%]
RESPONSES
Yes
60
100
No
60
100
Total
Source:
The overleaf table shows that all respondents are of the view
that Cost Volume Profit analysis help in their management
decision making.
77
4.2
TEST OF HYPOTHESIS
The objective of this analysis is to apply suitable statistical
Formula
[0-E]2
E
X2
Chi Square
Observed frequency
Expected frequency
Sum of.
Test of Hypothesis 1
Ho
Null Hypothesis:
That high degree of Operating Leverage does not affect Cost
Volume Profit in manufacturing industries.
Hi
Alternative Hypothesis:
That high degree of Operating Leverage affects Cost Volume
Profit in manufacturing industries.
78
RESPONSE
TOTAL
Yes
No
25
30
18
12
Total
41
19
60
Recall
X2
[0 - E]2
E
Operative Assumptions
Level of significance
5%
FR x FC
N
Where:
E[RC]
FR
FC
Total frequency
Row 1
cell 1 [E]
30 x 41
20
9.50
60
Row 2
cell 2 [E]
30 x 19
60
79
Row 2
cell 1 [E]
18 x 41
12.30
5.70
8.20
3.80
60
Row 2
cell 2 [E]
18 x 19
60
Row 3
cell 1 [E]
12 x 41
60
Row 3
cell 2 [E]
12 x 19
60
Table 4.2.1.
Contingency Table [3X2]
RESPONDENT
Total
RESPONSE
Yes
No
25
[20]
[9.50]
12.30]
[5.70]
[8.20]
[3.80]
41
19
[R 1]
df
Degree of freedom
[C - 1]
where:
TOTAL
30
18
12
60
80
Number of rows
Number of columns
[3 1]
:. df
[2 1]
[.2]
df
[1]
2
Decision Rule
Reject Null Hypothesis if the critical Value is less than
calculated Value.
Computation of the Chi Square:
X2
[0 - E]2
E
X2
9.50
12.30
9.50
12.30
X2
:. X2
6.61
Computed value of X2 =
6.61
81
Test of Hypothesis II
Ho:
Cost Control [i.e. Cost Volume Profit] technique will not help
to develop and expand manufacturing industries as well as not
resulting to high profitability.
Hi :
RESPONSE
TOTAL
Yes
No
26
30
10
18
12
Total
42
18
60
Recall X2
[0 - E]2
E
Operative Assumptions
Level of significance
5%
cell 1 [E]
30 x 42
21
12.60
60
Row 2
cell 2 [E]
30 x 18
60
Row 2
cell 1 [E]
18 x 42
60
82
Row 2
cell 2 [E]
18 x 18
5.40
8.40
3.60
60
Row 3
cell 1 [E]
12 x 42
60
Row 3
cell 2 [E]
12 x 18
Table 4.2.2
Contingency Table [3 x 2]
RESPONDENT
RESPONSE
TOTAL
Yes
No
26 [21]
4 [9]
30
10
8 [5.40]
18
6 [3.40]
6[3.60]
12
42
18
60
[12.60]
Hardis & Dromedas
Total
df
[R 1]
df
[3.1] [2.1] =
[C - 1]
2x1 =
Decision Rule
Reject Null Hypothesis of the critical value is less than
calculated value.
83
[0 - E]2
E
X2
12.60
:. X2
8.40
3.40
8.44
Computed value of X2 =
8.44
Hi :
84
RESPONSE
TOTAL
Yes
No
26
30
14
18
12
Total
42
10
60
Recall:
X2
No Idea
[0 - E]2
Operating Assumptions
Level of significance
5%
Table 4.2.3
Contingency Table [3 x 3]
RESPONDENT
RESPONSE
Yes
No
26
[21]
14
[12.6]
2
[8.4]
42
3
[4]
1
[2.4]
4
[1.6]
8
TOTAL
No Idea
1
[5]
3
[3]
6
[2]
10
30
18
12
60
85
df
[R 1]
[C - 1]
:.
df
[3-1]
[3-1]
[2]
[2]
df
Decision Rule:
Reject Null Hypothesis if the critical value is less than the
calculated value.
Computation of Chi - Square
Recall: X2
[0 - E]2
E
X2
12.6
2.4
8.4
=
1.6
22.05
Computed value of X2
22.05
86
87
CHAPTER FIVE
5.0
SUMMARY
OF
FINDINGS,
RECOMMENDATIONS,
SUMMARY OF FINDINGS
This research work which was independently carried out by the
researcher led to some findings which are very important towards the
recommendations.
In the course of this research work, the findings show that,
Emenite Limited uses the job costing method. Because the company
uses job order costing method, which relates costs to a single order,
it was evidently clear that some of the raw materials used by the
company are imported and this makes procurement not to be very
efficient
and
easy.
The
constraining
circumstances
include
88
89
RECOMMENDATIONS
The study has afforded the researcher the opportunity to make
90
CONCLUSION
Enterprises that must survive, and grow in these times must
91
92
BIBLIOGRAPHY
Don, R. and Jack, G. [1991], Managerial Accounting,
Miffin Coy, USA: 223, 2nd Edition.
Houghton
93
94
QUESTIONNAIRE
University of Nigeria,
Faculty of Business Administration
Department of Accountancy
Dear Sir/Madam,
A Study on the Effectiveness of Cost-Volume-Profit analysis in
Manufacturing Industry [Case Study of Three Selected
Companies]
I am a student of the above named school currently conducting
a research on the Effectiveness of Cost-Volume-Profit analysis in
manufacturing industries.
This project is in partial fulfillment of the requirement of the
award of masters of Business Administration in Accountancy. I will be
grateful if you answer these questions for me.
This is purely academic exercise and you are assured that all
information given will be treated confidentially.
Thanks for your co-operation.
Yours faithfully,
95
INSTRUCTION
ii.
[c]
Above 35 years
iii
1.
Yes
2.
No
Yes
3.
No
[b]
[c]
Scarce resources
96
[d]
4.
5.
[a]
At breakeven
[b]
Above breakeven
[c]
Below breakeven
6.
No
If yes, does the high cost of goods and services depend on the
strategies adopted by the management?
Yes
7.
No
No idea
8.
No
If yes, does high degree of operating leverage affect costvolume-profit of your firm?
Yes
9.
No
No
97
11.
[a]
Equation method
[b]
Graphical method
[c]
12.
Marginal costing
[b]
Absorption costing
[c]
Yes
13.
No
Dont know
14.
[a]
Equation method
[b]
Graphical method
[c]
Yes
No
98
BY
DEPARTMENT OF ACCOUNTANCY
FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA, ENUGU CAMPUS
NOVEMBER 2008
99
BY
DEPARTMENT OF ACCOUNTANCY
FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA, ENUGU CAMPUS
NOVEMBER 2008
100
CERTIFICATION
is a postgraduate
..
Supervisor
Head of Department
Date: ..
Date:
iii
101
DEDICATION
102
ACKNOWLEDGEMENT
103
ABSTRACTS
104
TABLE OF CONTENTS
PAGE
Title Page .
Certification ...
ii
Dedication ..
iii
Acknowledgement
iv
Abstract ..
Table of Contents .
vii
CHAPTER ONE:
2.0. Introduction .
10
References
11
CHAPTER TWO:
LITERATURE REVIEW
12
2.1
Cost Accounting.
17
18
Production Capacity/Volume
21
2.2
105
22
2.3
Operating Leverage
23
2.4
Ascertainment of Profit
26
2.5
26
29
2.6
31
2.7
35
2.8
39
41
41
41
44
References
51
CHAPTER THREE:
3 Research Design and Methodology ..
53
Sources of Data
53
53
53
3.2
Method of Investigation ..
54
3.3
55
3.4
55
3.5
Analytical Techniques
56
3.1
106
CHAPTER FOUR:
4 Data Presentation and Analysis .
57
4.1
Analysis of Responses
57
4.2
Test of Hypothesis
64
CHAPTER FIVE:
5 Summary of Finding, Recommendations,
Conclusions and Suggestion for Further Study
73
5.1
Summary of Findings ..
73
5.2
Recommendations ..
75
5.3
Conclusion
76
5.4
77
Bibliography .
78
Appendix ..
80