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The increased complexity of the society and high level of competition in the business
world has made it imperative for business organization to do serious planning and control
in order to survive volatile business climate. This research work studied budgeting as a
tool for planning and control in a manufacturing firm with particular emphasis on
Nigerian Bottling Company PLC, Enugu. The main objective of this study was to x-ray
the relevance of budgeting as tool for planning and control in manufacturing firm. And
also to ascertain the effect of non-existence of budget on the performance of business
organization. The methodology adopted were simple percentage and chi-square statistical
methods to deduce general statement about the effect of budgeting on planning and
control is relevant for the survival of manufacturing companies. Also, budgeting is a tool
for measuring efficiency and performance in manufacturing firm. The recommendations
put forward was that management of every organization should prepare budgeting and
adhere strictly to the provisions of the budget. There should also be a regular and periodic
review of the budget in order to detect variations. The research work will serve as a
template to managers, entrepreneurs, creditors, and employees on how to effectively
allocate scarce resources judiciously through budgetary planning and control.
TABLE OF CONTENTS
Title page = = = = = = = = = i
Approval page = = = = = = = = = ii
Declaration = = = = = = = = iii
Dedication = = = = = = = = iv
Acknowledgement = = = = = = = v
Abstract = = = = = = = = = vi
Table of content = = = = = = = = vii
List of table = = = = = = = = viii
CHAPTER ONE: INTRODUCTION
1.1 Background of Study = = = = = = = 2
1.2 Statement of Problem = = = = = = = 3
1.3 Objectives of Study = = = = = = = 4
1.4 Research Questions = = = = = = = 4
1.5 Hypothesis Formulation = = = = = 5
1.6 Significance of the study = = = = = = 6
1.7 Scope of the Study = = = = = = 7
1.8 Limitation of the Study = = = = = = 8
1.9 Definition of Terms = = = = = = = 9
2.1 Review of Literature = = = = = = = 12
2.2 The Concept of Budgeting = = = = = = 13
2.3 Benefits of Budgeting = = = = = = = 16
2.4 Type of Budgeting = = = = = = 18
2.2.1 Fixed Budget = = = = = = = = 18
2.2.2 Flexible Budget = = = = = = = 19
2.2.3 Master Budget = = = = = = = 20
2.2.4 Functional Budget = = = = = = = 21
2.4 Approaches to Budgeting = = = = = = 25
2.4.1 Zero-based Budgeting (ZBB) = = = = = = 25
2.4.2 Planning, Programme and Budgeting System (PPBS) = = 27
2.4.3 Rolling of continuous budgeting = = = = = 28
2.4.4 Tool for effective budgeting = = = = = = 29
2.5.1 Budget committee = = = = = = = 30
2.5.2 The Accounting Staff = = = = = = = 32
2.5.3 Budget manual = = = = = = = 32
2.6 Management Planning through Budgeting = = = = 33
2.7 Profit Planning Process = = = = = = 34
2.8 The Budgetary Control Process = = = = = 36
2.8.1 Establishment of standards as the basis for control = = = 41
2.8.2 Measurement of performance = = = = = 41
2.8.3 Comparing performance against standard = = = = 42
2.8.4 Corrections of in favourable deviations = = = = 42
2.9 The human aspect of budgeting and budgetary controls = = 43
2.10 Possible Limitations of Budgeting = = = = = 44
2.11 Stages in the Budgeting Process = = = = = 44
2.12 Assembling the Master Budget for a Manufacturing
organization = = = = = = = 46
CHAPTER THREE: METHODOLOGY
3.0 Introduction = = = = = = = = 49
3.1 Research Design = = = = = = = 49
3.2 Sources of Data = = = = = = = 50
3.3 Primary Sources = = = = = = = 50
3.4 Secondary = = = = = = = 50
3.5 Population of Study = = = = = = = 51
3.6 Determination of Sample Size = = = = = 51
3.7 Sampling procedure = = = = = = 52
3.8 Questionnaire administration = = = = = = 52
3.9 Questionnaire administration schedule = = = = 52A
3.9 Method of analysis and hypothesis testing = = = = 53
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.0 Introduction = = = = = = = = 55
4.1 Presentation of Data and Analysis = = = = = 55
4.1.1 Question on Personal data = = = = = = 56
4.1.3 Whether the system of budgeting provides a formal budget = = 58
4.1.4 Whether the Responsibility of Every Individual is Defined = = 58
4.1.5 Whether the Budget is a performance Evaluator in your company = 59
4.1.7 How does your company respond to deviation = = = 60
4.1.8 The Type of Budgeting Operated = = = = = 62
4.1.9 Whether the Budget is a tool for measuring efficiency in the company = 63
4.1.10 Whether the Budget is relevant to management in decision making = 64
4.1.11 Is the budget a tool for measuring efficiency in your company = 66
4.1.12 Whether the system budgeting provide a formal budge = = 71
4.1.13 What the survival of your company depends on contingency table = 76
CHAPTER FIVE: SUMMARY OF FINDINGS, RECOMMENDATIONS AND
5.0 Introduction = = = = = = = = 80
5.1 Summary of Finding = = = = = = = 80
5.2 Recommendation = = = = = = = 82
5.3 Conclusion = = = = = = = 83
The success of every organization depends largely on
effective planning and control. Planning and control are preconditions
for the attainment of organizational goals. The
objectives of organization are realized through a careful plan of
action and control. Both public and private organizations are
established for the purpose of achieving specific objectives.
Budgetary planning and control are managerial functions
responsible for setting specific targets or expectation to be
met. Budgeting is not only a management planning device but
also a basic accounting model for managerial control. In
manufacturing firm, planning and control are used to set
profit target, revenue, prices and cost.
Hence, planning is the process of deciding ahead of time,
what a firm seeks to achieve and how it seeks to achieve them.
Planning is future-oriented. Control on the other hand, is the
evaluation of performance and the putting in place of
corrective measure where necessary. Control seeks to compare
plans with actual goal realized. Control entails restrain,
supervision, safeguarding, checking or even to correct
1.1 BACKGROUND OF THE STUDY
In a manufacturing industry, and other business
organization, top or line managers are faced with problems of
limited resources due to organization policies. Such policies
may include income and expenditure policies, raw material
utilization policy, purchasing policy, production policy, labour
and time limit policies, it is viewed against the above
mentioned background that the concept of budgeting as a tool
for planning and control is pertinent. It is about making plans
for future, implementation, and monitoring of activities to see
whether it conforms to the plan.
Budget is thus, a formal expression of managerial plan in
quantitative and monetary terms encompassing different
phases of operation aimed at assisting management in the
realization of organization’s objectives. Budgeting is a financial
and quantitative interpretation, prior to a defined period of a
policy to be implemented in order to achieve a given objective.
1.2 STATEMENT OF THE PROBLEM
Generally, organizations are faced with limited resources
and the allocation of scarce resources to meet competing
needs. The problem bedeviling most organization is how the
available scarce resources can be allocated effectively and
efficiently to achieve organizational objectives.
The problem therefore, is most manufacturing firm do
not appreciate the relevance of budgetary planning and control
for its survival.
Another glaring issue is the attitude of employees toward
budget implementation. Budgeting may create a sense of
confusion, frustration, suspicion and even hostilities within
organization because employees regard the goals of the
organization as alien to their individual goal.
Most often, government establishment feel that budgeting
is a mere paper work that can be toyed with, thus, most
management executive do not adhere strictly to the budget or
implement it religiously. While many private firms feel that
there is no enabling law binding on them to prepare a budget.
This often makes them to operate without a formal budget.
1.3 OBJECTIVES OF THE STUDY
The objectives of this study shall include:
1) To ex-ray the relevance of budgeting as tool for
planning and control in manufacturing firm.
2) To ascertain the possible effect of non-existence of
budget on the performance of business organization.
3) To create an opinion as to whether budgeting is
actually an effective tool for profitability planning and
4) To ascertain the extent to which budgetary planning
and control aid management in decision making.
1.4 RESEARCH QUESTIONS
The following research questions are formulated for the
i. To what extent does the private sector appreciate the
relevance of budgetary planning and control?
ii. What is the attitude of employees towards budget
iii. How can budgeting be used as a performance
iv. What are the problems involved in the implementation
1.5 HYPOTHESIS FORMULATION
The success of this research work depends on the
formulation and testing of hypothesis and the drawing of
conclusions from it. The hypothesis is as follows:
Ho: Budgeting is not a tool for measuring efficiency
and performance in manufacturing firm.
Hi: Budgeting is a tool for measuring efficiency
and performance in manufacturing firm.
Ho: That successful business organization does not
make use of formal budget as management tool.
Hi: That successful business organization make use of
formal budget as management tool.
Ho: Effective budgetary planning and control is not
relevant for the survival of manufacturing
Hi: Effective budgetary planning and control is relevant
for the survival of manufacturing companies.
1.6 SIGNIFICANCE OF THE STUDY
The significance of this study is that if the
aforementioned objectives are achieved, this research work will
enable managers and employees of organization to appreciate
the relevance of budgeting as a control tool for performance
evaluation and measurement.
The study will also aid top management of business
organization to work out effective strategies to surpass
Resources to competing alternatives in order to meet
organizational goals, small business will be able to evaluate
performance and correct deviation where necessary.
1.7 SCOPE OF THE STUDY
This research work shall focus on the “relevance of
budgeting as tool for planning and control in manufacturing
In carrying out this study, the researcher focused
attention only on a particular manufacturing firm, even
though, there are many others. In Nigeria since the searcher
could not visit all the manufacturing firms, he limited the
scope of his study only on Nigeria Bottling Company, Enugu.
The decision to study the relevance of budgetary
planning and control about Nigeria Bottling Company was
borne out of its international outlook. It has gained goodwill in
its operating environment in spite of the notable nature of
Nigeria’s economy; it has been surviving for many years
amidst many competitors. Therefore, references to any other
business organization are just for the sake of clarity and
emphasis within the scope.
1.8 LIMITATION OF THE STUDY
In the course of carrying out this research work, the
researcher encountered a lot of hurdles. Many organizations
are not willing to disclose detail information relating to their
business operations. This affected the collection of reliable
Financial constraint also affected the researcher since
much is needed for transportation and the procurement of
The time frame was not also enough to complete a
research of this magnitude since the researcher was also
involved in his course work, and other official work.
1.9 DEFINITION OF TERMS
1. Budget: A budget is a plan quantified in monetary
terms prepared and approved prior to a defined period
of time, usually showing planned income to be
generated and expenditure to be incurred during that
period and the capital to be employed to attain a given
2. Budgeting: This is the process of making future plan
of action formulated by management for the whole
organization or a section, expressed in monetary
3. Budget manual: Budget manual is an instruction or
information manual about the way budgeting operates
in a particular organization and the reasons for having
4. Planning: Planning is the selection of short and long
term objectives and the drawing up of tactical and
strategic plans to achieve those objectives.
5. Efficiency: This is the minimum cost of input required
to produce a desired amount of output.
6. Effectiveness: This is the extent to which actual
performance compares with targeted performance.
7. Economic Order Quantity (EOQ): This is the size that
minimizes the sum of carrying and ordering cost.
8. Cost Centre: This is any location, person or items or
equipment for which costs may be ascertained and
used for the purpose of cost control.
9. Profit: This is the difference between revenue and
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