THE ROLE OF BUDGETARY CONTROL AS A TOOL FOR COST CONTROL IN MANUFACTURING COMPANIES IN NIGERIA

THE ROLE OF BUDGETARY CONTROL AS A TOOL FOR COST CONTROL IN MANUFACTURING COMPANIES IN NIGERIA

Abstract

This study explored the role of budget control as a cost control tool in manufacturing companies in Nigeria. The purpose of this study was to examine the impact of budget control on cost control. The survey sample included 10 manufacturing companies registered on the Nigerian Stock Exchange (NSE) namely Nestlé Nigeria Plc, Unilever Nigeria Plc, Evans Medical Plc, Beta Glass Plc, 7-UP Bottling Company Plc and Nigeria Brewery Plc. , Nigeria Flower Mills Plc, Dangote Group, Pz Cussons, Glaxosmithkline.

A structured questionnaire was used and the study selected 190 randomly selected employees from manufacturing companies using both targeted sampling and simple random sampling techniques . This study also used a descriptive survey design and a post hoc design.

Data were analyzed using descriptive statistics and regression analysis. Findings of the study indicated that Budgetary control has impact on cost control in selected manufacturing firms in Nigeria; Budget ensures effective cost control and profit growth in selected manufacturing firms in Nigeria; There is relationship between planned and actual budget in selected manufacturing firms in Nigeria.

The study concludes that budget is an effective tool used by management to control cost in manufacturing firms in Nigeria.

The study suggests amongst others that, It is important to develop a budget manual which everyone in the organization can refer to for guidance, education and information about the budgetary process; Management of selected firms should introduce adequate accounting system which will bring about checks and balances; In order for budgeting to achieve its objectives, it is necessary that budget should not be too restrictive and/or rigid; The budget set by the management should be the one that is attainable.

CHAPTER ONE

INTODUCTION

1.1 Background of the Study

The changing complexity of business activities and the ever changing conditions of business environment- social, economical, political and technological advancements makes it ever increasingly difficult for an organization to consistently earn a profit that could be termed a fair return on the capital invested. Budgeting and budgetary control has for long be a techniques of interest to management accountants, business experts, and financial evaluators. Traditionally, professionals have accepted the basic building blocks of the budget system, the budgeting and budgeting system, as the basic foundation for profit planning and cost control in an organization.

A budget identifies planned expenditures for a project, program, or portfolio. This is used as a baseline to provide actual expenditures and projected final labor costs. Initial cost estimates can be comparative or parametric. These are explored for feasibility and desirability of the initiative and refined as the scope, timeline and resources are better understood. Once approved, these refined estimates will be the base costs. A profile or effort is created by associating costs with activities in the schedule.

A budget is defined by the Chartered Institute of Management Accountants (CIMA) as “a financial or qualitative statement prepared and approved prior to a specified period to achieve a specified purpose. It includes capital employed.”

A budget provides a detailed plan of action for your business over a period of time, as planning before problems occur allows you to anticipate problems before they occur and seek solutions through careful research. . The budget planning process allows managers to consider how things may change over the next year and what steps they need to take now to respond to the changing situation. , you can reliably plan for future operations.

According to Bromwich (2000), cost management is the process of setting standards, measuring actual results, comparing actual results to standard costs, and taking corrective action for deviations. Adeniji (2004) explained that cost control is the regulation of a company’s operating costs and an effort to keep costs within acceptable limits. These limits are typically set as standard or target cost limits in formal operating plans or budgets. Cost control measures are required when actual costs deviate excessively from planned costs.

Ukpai (1999) found that cost control measures lead to the reduction of excessive spending, for example when material waste exceeds budgets or productivity levels are higher than normal. However, cost reduction programs may aim to lower expected cost levels by reducing costs below current standard levels, such as through the purchase of new equipment, changes in production methods or technology. However, standards reflect current costs and conditions, not necessarily those that minimize costs (ukposido, 2002).

The importance of an internal cost management program cannot be overemphasized. Losing companies need to increase profits or become more competitive. You need to cut costs to be successful. Knowing how to implement an effective cost control strategy can be a key factor in a company’s survival.

Cost control is simply avoiding waste within your existing environment. The environment consists of agreed operating procedures for which standards have been developed. These criteria can be expressed in a variety of ways, from rough budget levels to detailed standard costs.

Cost control is defined as the regulation of company operations by enforcement action. Cost control is aimed at achieving sales targets. Cost control is about setting standards. The company is expected to comply with the standards. The focus of cost management is past and present. Cost control applies to those that have a basis. An attempt is made to achieve the lowest possible cost under the current circumstances. Cost control is a preventative function.

Cost control is performed by various techniques such as inventory control, standard costing, budget control, labor cost control, and material cost control. Cost control helps improve profitability and competitiveness and is essential for increased productivity. Cost control also helps businesses cut costs and lower prices. Without cost control, profits can be significantly reduced despite large increases in sales volume. If your products are reasonably priced, you will be able to sustain higher sales and thus retain labor employment.

1.2 Problem Description

Every business has a primary duty to achieve the goal of maximizing business profits through budgeting. That is, compare performance against plans or goals. Due to our economic conditions and government policies, this goal is greatly hampered during periods of economic recession characterized by low capacity utilization, high interest rates, and insufficient foreign exchange to purchase necessary commodities. You can

Due to economic concerns, organizations using budget control as a means to control spending often find it very difficult to stay within set budgets. This is because the rising cost of doing business within the country is a top concern for most businessmen and all citizens. with big feet. This has led to capital flight, the closure of some companies and even the relocation of manufacturing companies to neighboring countries where the cost of doing business is high.

1.4 Purpose of the survey

The main objective of this study is to analyze the impact of budget control on cost control in manufacturing companies in Nigeria. Specific goals are:

Evaluation of cost control techniques used by a manufacturing company in Nigeria
Knowing if a budget will help ensure effective cost control and profit growth.
Evaluate the relationship between planned and actual budgets.
Determining the Impact of Budgetary Control on Cost Control in a Nigerian Manufacturing Company.
1.5 Research hypothesis

Hypothesis 1:
Budget control does not affect the cost control of manufacturing companies in Nigeria. Hypothesis 2:
Budgets do not guarantee effective cost control and profit growth.

Hypothesis 3:
Plan budget and actual budget are not linked

1.6 Validity of research

This study aims to help determine how budgetary control can be a useful tool for evaluating cost control in manufacturing firms. Helps management evaluate performance in terms of profit, planning, and management. The study also helps assess the cost control techniques used by manufacturing companies.

This study will help manufacturers find out if they can cut costs and maintain high quality in their products and services.

The importance of research work is to provide theoretical and practical permanent solutions to the problems that manufacturing companies face in increasing profitability through budget control. The study also reveals how good budget management as a cost control tool can lead to the growth and expansion of manufacturing companies in Nigeria. Another importance of research is the need to establish that budgetary control provides a benchmark for measuring the organization’s actual performance.

Finally, this work also aims to complement the existing literature to assist future researchers interested in this topic and to serve as a basis for further references.

1.7 Scope of investigation

This study is limited to cost control as the dependent variable and budget control as the independent variable. Consider a manufacturing company in Nigeria. The purpose of this study is to investigate and evaluate budget control as a cost control tool in the Nigerian manufacturing industry.

The analysis performed in this study is based on data provided to researchers in questionnaires completed by company employees and department heads.

1.8 Definition of terms

Budget control:
This is a management technique that compares actuals to budgets. This is the process of creating budgets for future periods and comparing them to actual performance to identify variances. Discrepancies (variances) are the responsibility of key individuals who can exercise control measures or amend the original budget.

Entertainment office:
We are a trading company that turns raw materials and parts into finished products and products. A manufacturing company is a company that uses components, parts, or raw materials to produce finished products. These finished products can be sold directly to customers or other manufacturing companies that use them to create various products. Manufacturing companies in today’s world are typically made up of machines, robots, computers, and people, all of whom manufacture products in specific ways.

Cost management:
It is a management tool that regulates the operations of production companies. In a globalized economy, mere planning does not work