THE INFLUENCE OF ACCOUNTING INFORMATION TOWARD DECISION MAKING IN MANUFACTURING FIRM (A CASE STUDY OF CHAMPION BREWERIES PLC, UYO)
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THE INFLUENCE OF ACCOUNTING
INFORMATION TOWARD DECISION MAKING IN MANUFACTURING FIRM (A CASE STUDY OF
CHAMPION BREWERIES PLC, UYO)
CHAPTER ONE
BACKGROUND
OF THE STUDY
1.1 INTRODUCTION
In a
manufacturing firm, the inevitable fact is that materials, trained personnel,
proper funding and good management constitute the component part of
accountability as a watch word and because of this in a day-to-day business
affairs there is need for accurate and informative financial records and
statement which are necessary in making sound decisions by the managers. It is
based on this premise that accounting information comes in since it objective
is to help managers determine whether a profit has been made, to know the
amount of the assets on hand, the amount owned to creditors and amount of
owners equity which will help them have a good timely and useful information.
However,
accounting is said to be a system that measures business activities processes
that information into reports and communicates these finding to decision
makers, Harris (2002).
On the other
hand, the series of activities which are limited and form a progression of
steps beginning with observation, the collecting, recording, analyzing and
finally communicating information to its users. This information helps managers
to take proper decision and control operations. It serves as a decision tool
and can only come from a well-designed and well-run accounting system. Although
management is not involve in the details of day-to-day accounting procedures or
end of period accounting procedures but the efficiency of these procedures has
a major influence on the quality and promptness of the information they
receives. Brock, Palmer & Cunningham (2001).
Therefore,
accounting information in champion breweries is expected to have the essential
quality of good and accurate financial transaction of the firm since it is the
foundation on which the activities of their business depend on. Champion
breweries plc was incorporated as a private limited liability company on the
31st of July 1974 within the name south east breweries limited because of
political imperatives in Nigeria the company’s name was changed from south east
breweries limited to cross rive breweries limited and thereafter to champion
breweries plc. The latter name, champion breweries limited was changed to
champion breweries plc on the 1st September, 1992.
On the 24th
of November, 1974 the government of the then south eastern state of Nigeria
signed an agreement with Messrs Haze Bravery.
GMBH of
Hamburg, (technical partners) for the supply and construction of a turkey
brewery in Uyo with a capacity of 150000 hectoliters. The foundation stone of
the brewery was officially commissionable and its products Champion larger been
launched into the market with success.
On the 22nd
of July 197\97, a second contract was surged with the technical partners to
increase the capacity of the brewery from 150000 to 50000 hectolitres. The
foundation stone for the expansion was laid on the 24th of December 1977. The
expansion, which incorporated more sophisticated machinery, was completed and
put on trial, run in September 1979. The second production line was officially
commissioned on the 11th same year the company’s products “Champion Leger Beer”
and “Champion Malta” won silver medal at
an international medal for quality at the 16thworld selection for beers and
non-alcoholic beverages in Luxemburg. Consequent upon pressure of demand for
its product, million hectoliters. The third expansion, which gulped substantial
resources, could not be realized. The non-completion of expansion program
coupled with back of working capital and inadequate maintenance of the plants
force the company to close its doors for business between 1990 – 1991. All
subsequent reactivation attempts did not yield the desired results.
With the
audient of democracy in Nigeria in May 1999, the government of Akwa Ibom state
made the reactivation of the brewery a cardinal activity. Consequently, the
Akwa Ibom State investment and industrial promotion council (AKIPOC) was
charged with the responsibility reactivation the company person to this
mandate, AKIPOC, in conjunction with the board of directors of the company went
to the market to solicit for core investors/technical managers, in the process
Messrs, Montgomery venture incorporated of panama (with offices in Geneva,
Switzerlar) was identified and brought into the company as core
investors/technical managers after a memorandum of understanding was signed.
Based on the
memorandum, a reactivation committee was set up by board of the company to work
with the core investors/technical managers for the revamping of the company.
The reactivation process which commenced in February 2000, lasted about
nineteen month, now the plant has been revamped and restructured to use one
hundred percent locally sourced raw materials. The brewery is now fully
operational and the capacity is 500000 hectolitres per annum. (Champion
Breweries Plc 2001 Annual Report).
1.2 RESEARCH PROBLEM
The poor
performance and failure of manufacturing companies in Akwa Ibom State may have
been as a result of poor, application of management accounting information
standards.
Manager in
most manufacturing companies consciously do not use accounting information as a
guide I making production and price decisions.
The lack of
the use of accounting information will equally hinder the proper allocation of
the organization scarce resources.
It should be
noted that the compliance to the management accounting standard by the managers
in decision making alone may not completely rule out the incidence of poor
performance and failure in our industries but will do a great extent.
1.3 OBJECTIVES OF THE STUDY
This
research work will help to find out the importance of accounting information
and its relevance to the growth of the economy.
To examine
the impact of this accounting information in running a well organized firm like
champion breweries.
To determine
how accounting information can of a manufacturing firm.
iii. To determine factors that constrains
or promotes the effective uses of accounting information.
To ascertain
if there is any positive relationship between the effective use of accounting
information and the quality of decision in manufacturing companies.
To make
recommendations, which will enhance the employment of information provided by
accounting system?
1.4 RESEARCH QUESTIONS
In carrying
out this research work, the following questions were formulated as follows:
What are the
importance of accounting information in a manufacturing firm.
How does
accounting information effect the growth and goals attainment of the firm?
How does the
influence of accounting information help in the achievement of corporative
objectives of an organization?
4) Do the managers in the company apply the
accounting information in their decision?
5) Is it necessary that accounting
information is needed towards decision making in a manufacturing firm.
1.5 RESEARCH HYPOTHESES
The
following null (H0) and alternative (Hi) hypotheses are formulated.
H1: Managers
on manufacturing companies make effective use of accounting information in
making production and pricing decisions.
H0: Manager in manufacturing companies do
not make use of accounting information in making production and pricing
decisions.
H1: The use
of accounting information has led to a high level of profitability.
H0: The use of accounting information has
led to a high level of profitability.
H1: Accounting information helps in proper
allocation of scarce resources.
H0: Accounting information does not help
managers in proper allocation of resources.
1.6 SIGNIFICANCE OF THE STUDY
This study
will be of immense importance to the public who in one way or the other will
use it to properly organize the affairs of their business.
Also it will
help to indent the understanding and appreciation of accounting firm as well as
suggest ways that will enhance the effectiveness and efficiency of the firm.
Furthermore,
it will be good interest to the management of Champion Breweries Plc, Uyo.
Finally, it
will serve as a source of material or reference for further research work to
other researchers in future.
1.7 SCOPE OF THE STUDY
The scope
this research will be carried in Champion Breweries within Uyo metropolis with
particular reference to the influence of accounting information or decision
making in a manufacturing firm.
1.8 LIMITATION OF THE STUDY
In the cause
of this study there were certain variable that were identified as limiting
factors.
Firstly, it
was identified that accounting information in decision making are dominantly
done at the managerial level, it was indeed very difficult to reach out to a
good number of top managers to obtain information relating to this study.
Again, the
response by the respondents was very slow and reluctant at providing what is
considered to be official constraints, time and distance of material also
contributed to the limitation of the study. Nevertheless, the research
endeavored to still conduct an acceptable study in spite of the aforementioned
shortcoming.
1.9 DEFINITION OF TERMS AND ACRONYMS
Accounting:
This is a system that measures business activities process that information
into reports and communicate these findings to decision makers. Harris (2002).
Information:
This is a means of having effects over something without force. (2002).
Decision
making: This is the process of sufficiently reducing uncertainly and doubt
alternative to allow a reasonable choice to be made from among them. (Harris
(2002).
Manufacturing:
The process of converting raw material component, or part into finished goods
that meet a customers expectation or specification. (Business dictionary).
Planning:
The use of information supplied by accountants and making decision by which management
formulates objectives and choose a pattern of action in order to achieve those
objectives for the further business of those firms. Anyaogu (2002).
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