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BUDGETING AS A TOOLS FOR PLANNING AND CONTROL IN AN ORGANIZATION (A CASE STUDY OF STANMARK COCOA PROCESSING COMPANY ONDO) 1 ABSTRACT This project work is presented in five chapters, chapter one deals with an introduction to research topic, description of the research, it objective and limitation. Chapter two which contain the literature review embraces the concept of budgeting, budget committee and budget manual, functional budget, master budgets and human aspect of budgeting. Chapter three, touch vividly on the research methodology, method of data collection and making reference to the constraints to data collection. Moreover, the essence of the research work was highly emphasized in chapter four with analysis of data collection and also the presentation of data. The recording of transaction and test of hypothesis were also emphasized. Chapter five, deals with the presentation of the summary of procedures used, principal findings, conclusions, Recommendations and finally suggestion for further studies. Conclusively, this write up is committed to budgetary as a tool of planning and control. I am of the opinion that this research work did not fail the functional budget use in manufacturing companies operations as expected in the modern economy so as to improve the activities of our manufacturing industries to the economy system. 2 TABLE OF CONTENTS TITLE PAGES Certification ii Dedication iii Acknowledgement iv Abstract v Content vi CHAPTER ONE 1.0 Introduction 1 1.1 Statement of the problem 2 1.2 Objective of the study 3 1.3 Significance of the study 4 1.4 Scope and limitation of the study 5 1.5 Definition of terms 6 1.6 Statement of the research hypothesis 9 CHAPTER TWO 2.0 Literature review 10 2.1 Definition of budget 13 2.2 Definition of budgeting 14 2.3 Importance of budgeting 14 2.4 Budget and budgetary plan 15 2.5 Budget and budgetary control 15 2.6 Brief history of the case study 16 2.7 Review of important related issue 18 3 CHAPTER THREE 3.0 Research methodology 26 3.1 Statement of research methodology 26 3.2 Method of data collection 26 3.3 Constraints 28 CHAPTER FOUR 4.0 Data presentation and analysis 29 4.1 Data presentation 29 4.2 Data analysis 31 4.3 Test of data analysis 32 4.4 Interpretation and report of data analysis 39 CHAPTER FIVE 5.0 Summary, Conclusion and Recommendation 40 5.1 Summary 40 5.2 Report of findings 40 5.3 Conclusions 41 5.4 Recommendations and suggestions 42 BIBLOGRAPHY 45 APPENDIX 48 4 CHAPTER ONE 1.0 INTRODUCTION Budgets are required to carry out a set of functions, including forecasting, setting target, planning, coordinating, and evaluating performance. There are various measures of controlling the organizational activities, financial and non financial, amongst the control measures, budget is the most important. Budgetary planning and control is the most viable use of accounting information in the management control process. By setting standard of performance and providing feedback by means of variance report, the accountant supplies much of the fundamental information required for overall planning and control. According to stoner (1976) “Budgets are the most important widely used means for planning and controlling activities at every level of an organization profit planned for some future date. The planned figure become the standard by which performance are measured”, Budgets are fundamental part of an organizational control program. They are usually stated in monetary terms. Budget can be particularly comprehensive, convenient and flexible control devices. Furthermore, the monetary 5 aspect of budget means that they can directly provide real information on every organization resources and a key organization goal. Hence they are heavily favored by profit oriented companies. Budget establish a clear and unambiguous standard of performance and cover a period usually a year; at stated intervals during the time period, actual performance will be compared directly with budget, deviation can be quickly detected and acted upon. Also by submitting budget to a higher authority for approval, manager tends to commit themselves to reaching the budget objectives. Thus, their responsibility for these objectives is clear. If specified results are not obtained or if cost limit imposed by the budget was exceeded, the manager responsible for the budget will be held accountable. Therefore, a budget represents management projections of the future and this act as a forecast of event in the real world. 1.1 STATEMENT OF THE PROBLEMS A lot of observations and comments have been made on the importance of budget in the manufacturing industries; scholars said that budgets are being used to assist in the management of major areas of the manufacturing companies. Therefore, 6 it has become necessary to determine whether budgets are under utilized in manufacturing industries despite the immense benefits derivable from their optimum utilization. Budgets offer unlimited opportunities to the management and should be recognized as potential profit increasing tools. We should have self-confidence and positive outlook upon the utilization of budgets, since facts generated through budgets have become indispensable to successful management. In the light of the above, this write-up examines the significance of budgetary as a tool of planning and control in manufacturing companies. 1.2 OBJECTIVES OF THE STUDY The purpose of this write up is intended to investigate the possibility that there can be case of an inadequate utilization of budgets in manufacturing companies today. The principal aim of this write-up is to find out whether budgets are not adequately utilized, if any, and to create the awareness of the benefit being lost due to such under utilization. Another purpose of this project work is to highlight the unexplored potential of budgets necessary for efficient and smooth operations of the manufacturing company (ies) as far as planning and control are concerned. This study serves as reference materials to the potential scholars in related fields. 7 Finally, this study is also intended to bring out and recommend means of optimizing the usage of budget for planning and control in manufacturing companies. This also makes it possible for those companies that are yet to be aware of the benefit derivable from the use of budget. 1.3 SIGNIFICANCE OF THE STUDY The importance of budgeting as a tool for planning and control in a manufacturing company cannot be overemphasized because proper budgeting makes the planning and control to serve as an impetus to effective and efficient performance of the management of the manufacturing company (ices).Proper budgeting could enhance employee moral, increase output, improve equipment repairs, use of new kind of equipment, investment of surplus funds etc. It is in this connection that high proceeds would be recorded and that both primary and secondary objectives of the organization can be met. In the light of the above, it is assumed that this study will contribute to our understanding of the theory to be able to have a fair understanding for the thriving of any business organization in which they may find themselves. The study can also be of good assistance to learners in related field of studies to have broad knowledge of the concept of budgeting as a driving force for effective planning and control in manufacturing companies and other companies. 8 Finally, budgeting is so important as it serves diverse purposes, the whole process of budget preparation and subsequent performance evaluation by budgetary control needs to be carried out so as to motivate employees rather than create resentment and adverse reactions. 1.4 SCOPE AND LIMITATION OF THE STUDY The project work is mainly focused on importance of budgeting as a tool of planning and control in a manufacturing company, as a result of limitation to be discussed shortly, this write up is limited to Stanmark Cocoa Processing Industry, Ondo town, Ondo State. The operations of the manufacturing companies that are capable of being carried out through the aid of budgeting were investigated and attentions were solely focused on the planning and control. Actually, the successful execution of the project work is limited by some factor amongst which come as a result of the nature of our academic program, there was no enough time to conduct a very detailed study as might be mostly expedient. Finance was also a limiting factor to this research work. A study of this nature need a huge financial commitment but the capital available for this research work was limited. Contractual factor also serves as a limitation to the study. Most members 9 of staff are usually not willing to give out information about their company’s operation because of the need not to violate certain provisions of contract of employment (Duty of Secrecy). 1.5 DEFINITION OF TERMS 1 Budget: - It can be defined as a quantified plan of action relating to a given period of time; expressed in a quantitative or monetary terms. For a budget to be useful it must be quantified. There is a standard with which to measure the actual achievement of people, departments of various forms. It may also be defined as a quantitative statement prepared prior to a defined period of time, of the policy to be pursued during the period for purpose of attaining a given objectives. 2 Budget Reports:- These are reports that are sent regularly and promptly to the appropriate managerial grades responsible for completing the technique of budgetary by taking action to current and adverse trend disclosed. 3 Budget Manual:- This serves as a rules book and reference for implementation of a budget program. It tells what to do, when to do it, how to do it, and which form to do it on. Effective budgetary planning relies on the provision of adequate information to the individuals involved in the planning process. 4 Budget Committee:- This is a committee that serves as a consulting body to the budget officer, member generally include top level officers or the executives. 10 5 Budget Officers: - This is also called budget controller. This is usually a senior member of accounting staff who will advice on the preparation of the budget and collate them into master budget. 6 Budget Period:- Budget may span for a period of one year or less, more companies use budget as essential tools for long range planning, the usual planning and control budget period is one year. 7 Budgetary Control:- This relate to the use of budget as control device where by predetermined plans, output, income and expenditure are compared with an actual attainment so that, if necessary, corrective action may be taken before it is too late. 8 Master Budget:- This a summary of all the subsidiary budgets, which is commonly prepared as profit and loss account and Balance Sheet and presented to the committee and board of directors for final approval. 9 Governing Factor:- This is the factor, the extent of whose influence must first be assessed in order to ensure that the functional budgets are reasonably capable of fulfillment. This is also called limiting factor or key factor. 10 Functional Budget:- A factional budget is one which relates to any of the functions of an organization, functional budgets are subsidiary to the master budget, which is the summary budget, incorporated in component functional budgets which is finally approved, adopted and employed. 11 11 Zero Base Budgets:- This is a modern management tool for planning and controlling expenditure of an organization. It may be defined as an operating planning and budgetary process which requires a manager to justify his entire budget request in details from scratch (hence zero base) each manager share why he should spend any money at all. 12 Continuous Budgeting:- This is also known as rolling budget, this is a system of updating budgets, so that there is always a version of budget data base on current experience. This extends the planning horizon of the organization and so necessitating a continuous forward looking approach to budgeting. 13 Planning:- This is an important function of the management that deals with peeping into the future and determines what one will like to be in foreseeable future and prepare towards achieving the desired target. Planning also deals with the establishment, formulization, evaluation and solution of strategies, lotus and action require achieving the desire objectives. 14 Budget Centre:-This is an important section of an organization that is defined for the purpose of budgetary control. 15 Control:-This is also an important function of the management; it is the process by which management assures itself that action taken by the member of an organization conforms to its original plans and policies. In broader sense, control is concerned with efficient use of resources to achieve a previously determined 12 objective compared with a plan. Control is exercised by feedback of information on performance compared with budgeted plan. 1.6 STATEMENT OF RESEARCH HYPOTHESIS To have a better understanding and to emphases on the presentation of this research work, it is important to state the following hypothesis that were tested. These are; 1. That budgeting is widely used by the manufacturing companies during planning and control. 2. That the required qualified and component staff is employed. 3. That there is a section of the company responsible for planning and control. 4. That the success of the budget implementation depends on the laid down management policies. 5. That the budget report is sent regularly to the appropriate quarter. 6. That proper budgeting is the only good means of improving the activities of the manufacturing companies. 13 CHAPTER TWO 2.0 LITERATURE REVIEW The term “BUDGET” originated from a Latin word called “BUDGEE”. It is defined by the Institute of Cost and Management Accounting, as a financial and quantitative statement, prepared and approved prior to a defined period, of the policy to be pursued during that period for the purpose of attaining a given objectives. Furthermore, it is also described as a standard with which to measure the actual achievement of people, department form etc. It is also of large strategic plan relating to a period of time, expressed in quantitative or monetary terms. Every organization anywhere requires a budget to carry on it business. In the private sector, budgets are used to measure profit earnings in profit making organizations while the not-for-profit making organizations use budgets as a guide for their operations that is, as a measure for the distribution of resources which are limited and to estimate the funds to be received or expanded. The important thing to note is that a budget relates to “planned events”. Before a plan is finalized, a number of choices must be considered. The statement used in the process of determine the plan to adopt are known as forecasting. It is until the best of choice forecasts has been selected to the statements of probabilities become budgets. In 14 addition, all estimates have to be coordinated so that they become part of overall plan. Only then they can be called budgets. For control purposes, it is necessary to establish action plans. It is necessary to set budget covering a financial year of the firm during the course of the year, reports will be presented to the management at shorter regular intervals possibly monthly. This budget reports are continuous comparison of actual result with the budgeted revenue. The comparison brings about the various form of the budget objectives or alternatively to agree some modification of the organizational budget. In preparing a budget for ensuring period, each department head compiled an estimate of operations and submit it to the budget director. Apparently, certain department budget can be prepared, only after necessary information is supplied by certain other departments. Since there must be a logical sequence in preparing various functional budgets, a procedure should be set up to ensure the proper arrangement of the estimates of the various departments. The budget controls enables the management on the preparation of sectional budgets and collate them into master budget. sometimes such a system impose an order strain on the coordination ability of the budget director, but the formation of a budget committee may overcome this defect, creator coordination should thereby be 15 achieved, but there is always a tendency that at the committee, certain matter of on concern to individual members will be tabled. Finally, after the preparation and approval of the budgets, continuous compares of budget with actual performance must be made through the budgets report in order to determine whether or not efficiency is being attained by the organization. There are some principal budget factors that limit the size of operation of an organization in achieving its budget objectives. If the factor to which extent of whose influence must considered has been assessed in order to ensure that departmental budget are responsibly capable of fulfillment. The following are the key factors, which affect budgeting. MATERIALS 1. Availability of supply 2. Restrictions imposed by licenses, quota etc LABOUR 1. General; shortage 2. 0Shortage of specialized labor in a particular process 16 PLANT 1. Limited plant capacity due to shortage in supply, lack of capital and space 2. Bottleneck in certain key process MANAGEMENT 1. Insufficient capital, restriction policy 2. Shortage of efficient salesmen SALES 1. Low market demand 2. Shortage of efficient salesmen 3. Inefficient or inadequate advertising due to lack 2.1 DEFINITION OF BUDGET A budget may be defined as “a plan quantified in monetary terms prepared and approved prior to a defined period of time usually showing plans to be generated and, or expenditure to be incurred during that period and the capital to be employed to attain a given objective”. A budget is a future plan of action formulated by management for the whole organization or a section there of, which is expressed, in monetary term. A budget is therefore a detailed commitment to a plan of action, and this aspect is differ from a 17 “forecast” which is merely an assessment of future event which are likely to occur if no positive planning action is taken. (Adeniji”2002). 2.2 DEFINITION OF BUDGETING Budgeting can be known as the underlying activities or task that must generally be carried out to attain maximum level of the goal set on the budget. The fundamental concepts of budgeting are usually identified under the followings. 1. Management commitment to effective management participation by all level in the enterprises. 2. A management process that include planning, organizing, staffing, leading and controlling. 3. An organization structure that clearly specifies assignment of management authority and responsibility at all organization level 2.3 IMPORTANCE OF BUDGETING The importance of budgeting is the standard way that enables the management of an organization to meet their targeted and forecasted goals. These importances of budgeting are highlighted below; 1. Ensuring sound organization structure 18 2. Remove the cloud of uncertainty that exist among level of management in term of company objectives 3. Compels all member of management to participate in establishment of goals and plans 4. Serve as a useful performance-monitoring tools 5. Help to promote coalition of interest and to increase motivation. 6. Reduce the like-hood of fire-fighting approach to decision making 7. Help to achieve co-ordination between various departments and functions of the organization. 2.4 BUDGET AND BUDGETARY PLAN Planning is the determination and review of objectives in relation to the needs, both present and forecast, of the organization budgetary plans. The translation of first year of the program and financial plan to a more detailed and precise annual budget which sets targets for the performance, fixes limited for spending and forecast output to be achieved and (if any) income to be received. (A.A Adeniji 2002) 2.5 BUDGET AND BUDGETARY CONTROL 2.5.1 Budget: the Institute of Cost and Management Account (ICMA) define budget as “A plan qualified in mon etary terms, prepared and approved prior to a define 19 period of time, usually showing planned income to be generated and or expenditure to be incurred during that period and the capital to be employed to attain a given objective”. 2.5.2 BUDGETARY CONTROL The ICMA defines budgetary control as “the establishment of budgets relating to responsibility of executives the requirements of a policy and the continuous comparison of actual with budgeted result either to secure by individual action, the objectives of the policy or to provide a basis for its revision”. Budgetary control relate expenditure to the person who incur the expenditure, so that the actual expenses can be compared with budgeted expenses, this is in contrast to standard costing which relates expenses to a product a services. 2.6 BRIEF HISTORY OF CASE STUDY Stanmark is purely agricultural company that only relies on Agricultural raw materials for their production. It uses cocoa processing company. The export processing factory was established under Degree 63 of 1992 RC.157769. It started its operation on December 17, 1992. It was co-owned by Cadbury Nigeria plc (80%) AND A GROUP VASALITE Nigeria entrepreneurs with wide experience in Cocoa Industry (20%) for example, the late king Osemawe of Ondo Kingdom “OBA 20 ADESANOYE”and also high chief lisa of ondo kingdom CHIEF BAYO AKINOLA. Stanmark Cocoa Processing Company (SCPC) has a 14,500 Loren capacity plant located in Km5, Ondo Akure Road, Ondo town, Ondo State, 275 km from Logos Nigeria. The company is located right in the heart of the main raw material, since Ondo State accounts for about 70% of Nigeria’s cocoa output. Products from the plant include cocoa cake, cocoa butter and cocoa liquor which are exported to Europe and United State of America, while cocoa powder and cocoa cake are sold locally and to the African sub-region. Stanmark is the main, if not the only producer in Nigeria today, of cocoa liquor, the plant, constructed to Cadbury Schweppes” specifications, has consistently proved capable of meeting European Economic Community (EEC) standard of cocoa liquor. Raw material i.e. cocoa are supplied through Ed & F man Co.ltd, JOF local merchants and from village local merchants while product are sold to Cadbury, Ed & F man co.ltd, the cocoa company . The plant is completely automated using Siemens micro processor-based on automatic control systems. Packing is hygienically done into transparent cell phone; poly-bag, which are sealed, and final packing is into either woven sacks or cartons. Stanmark cocoa processing co.ltd. Has six departments for the efficiency of its operation, which are listed below 21 1. Administration department 2. Finance department 3. Material department 4. Engineering department 5. Provision department 6. Quality control department While it has a total number of 285 staff in these entire departments, the company has (MD) managing director as the head of i.e. to manage with 3 managers under him, these three managers are:1. General manager 2. Senior manager 3. Junior manager Each of these managers, have a special and specific duty and department to control for effective operation. 2.7 REVIEW OF IMPORTANT RELATED ISSUES 2.7.1 MASTER BUDGET When all subsidiary or functional budgets have been prepared that are summarized into what is known as “master budget” it is a comprehensive planning model of an organization for the next period, which is commonly prepared in form of 22 forecast profit and loss account and balance sheet and is variously called summary budget, planning budget, operating budget/plan etc presented to the budget committee for approval. The boards may make certain amendment before it is finally approved. However when the budget is finally approved it represents a standard, which should be achieved by each department in the undertaking. 2.7.2 FUNCTIONAL BUDGET Functional budget is one which relate to any of the functions of an undertaking. Functional budgets are subsidiary to the summary budget (master budget). There are many types of functional budgets, of which the following are frequently used. 1. Sales budget 2. Production budget 3. Material usage budget 4. Material purchase budget 5. Direct labour utilization and cost budget 6. Production overhead budget 7. Selling and distribution budget 23 8. Administration cost budget 9. Capital expenditure budget 10. Cash budget 1. SALES BUDGET This is probably the most tedious function budget to prepare because of difficulty in estimating the customer’s future demands, especially when a new product is being marketed. It is bedrock or which the preparation of production budget is based; it is usually prepared in terms of quantities, the evaluation at budget unit price. It is classified under a number of headings of which the following are commonly are used. (a) Product (b) Territories (c) Types of customers (d) Materials Preparation of this budget is the responsibility of the sales manager who may have aids in estimating sales of which the following may be important: (a) Historical analysis of sales (b) Business conditions (c) Reports by salesmen 24 2. (d) Market analysis (e) Special conditions PRODUCTION BUDGET This shows the quantity of products to be manufactured; it is prepared by the production manager based on the following: (a) The sales budget (b) The factory capacity (c) The budget stock requirement (d) The management policy. This budget is classified under various headings; (a) Products (b) Materials (c) Manufacturing department It should be noted that this budget is stated in finished physical unit. The determination of this budget gives rise to: (a) Direct material budget (b) Direct labour budget (c) Factory overhead budget 25 3. MATERIAL USAGE BUDGET This shows the estimated quantity of all the raw materials and components needed for the output demanded by the production budget. It serves the following purposes. 1. It serves the purchasing department and planning purposes 2. It provide data for raw materials control 3. It assist in preparation of purchase budget This subsidiary budget shows the details of the purchases which are planned to be made during the period to meet the need of the undertaking. The main purposes of this budget are a. To enable the purchasing department to plan its purchases and enter into longterm contract where advantageous. b. To facilitate the management of finance of the business by defining the cash requirement in respect of the budget period 4. DIRECT LABOUR UTILIZATION AND LOST BUDGET These budgets represent the forecast of labour requirement to meet the demand of the company during the budget period. This budget amidst linked with production budget. It serves the following purpose. a. To estimate the labour cost of production 26 b. To determine the direct labour required in terms of labour hours and hence, the number and grade of workers required to meet the production requirements. c. To provide the personnel department with personnel requirement, so that it may plan recruitment d. To provide data for determination of cash requirement for payment of wages e. To provide data for material control of labour cost 5. PRODUCTION OVERHEAD BUDGET This is the quantity of products to be produced expressed in terms of cost, it is classified under various heading e.g. (a) Product (b) Manufacturing departments (c) Materials (d) Element Many companies prepare a raw material budget, which give analysis figures of the element of cost sector of production 6. SELLING AND DISTRIBUTION BUDGET This shows the cost of selling and distributions of the quantities recorded in the sales budget. The sales manager will cooperate with the budget director in the 27 preparation of this budget. The sales budget and selling and distribution cost budget are paid simultaneously because each has a definite impact on the other. 7. ADMINISTRATION COST BUDGET This shows the forecast of all administration cost that will be incurred by the undertaking in a budget period. Most of the expenses are fixed into a particular limit or range. 8. CAPITAL EXPENDITURE BUDGET This budget shows the estimated expenditure on the tangible asset during the budget period. Its objectives are: a. To enable the company establish a system of priorities in expenditure. b. To correct capacity imbalance. c. To make proper financial provision to meet planned expenditure. d. To provide tool for controlling capital expenditure. 28 9. CASH BUDGET It establish sound basis for control of cash position. There are three method of preparing the cash budget. They are: a. The receipt and payment method b. The adjusted profit and loss method c. The balance sheet method. It must be noted that the development of this budget frequently reveals information about the level of funds planning through the organization and the pattern of cash disbursement and receipt. 29 CHAPTER THREE 3.0 RESEARCH METHODOLOGY 3.1 STATEMENT OF RESEARCH METHODOLOGY Research methodology are used for the purpose of the study, the procedure adopted in gathering data and their subsequent analysis so as to attain the desired goal and objective of providing useful information through the suggestion and facts given by respondents with a view to determine the significance of budgeting in a manufacturing organization. 3.2 METHOD OF DATA COLLECTION The methods used for the collection of information and data used for the purpose of this write-up were mainly from primary and secondary sources. The primary sources data were obtained by using the following techniques: 3.2.1 QUESTIONAIRE:- The questionnaire serves as a major tool for the collection of the required information. They are structured in order to answer the statement of the research study. This was prepared to cover a wide range of budgeting operations, and is also structured with most of the questions demanding “Yes” Or “No” answers, while opinions was also sought where necessary. 30 3.2.2 PERSONNAL INTERVIEW: Investigation requiring detailed examination was made through this means; the interviews were conducted in the offices of the organization and through interaction with the accountants and other staff who were very reluctant in giving out information. People directly involved in budget operation were asked questions as related to the area of interest and responses were given. This formed the basis in which the project work has been written. It formed the principal sources of information for the data collection. Also, the secondary data were collected using the following sources: Literature review, Review of the theoretical frame work, the review were made through textbooks, journals ,handouts, seminar /workshop paper of budgeting and other publication. Also data were obtained from the internet (WWW.tutor211.com and google.com). 3.2.3 SAMPLE AND SAMPLING TECHNIQUES The population for the study is made up of an estimated number of about two hundred and eighty five (285) people. Out of which (80) are the collar officer, the rest are casual workers, from the population of the collars staff 25% were selected aside. Simple random samplings were used in selecting the sample from six major departments that makes up the organization. 31 1. Administrative Department 2. Financial Department 3. Material Department 4. Engineering Department 5. Production Department 6. Quality Control Department Four people were selected from each of the department which makes the sampling size to a total of 24 respondents. 3.3 CONSTRAINTS The research was based on questionnaire and oral interview to gather the necessary information from the respondents. The questionnaire which was the main in- structure used for collecting reluctant information is divided into two sections A and B. Section A contains the Bio-data of the respondents while section B deals with the theme of the research. There are twenty (20) questions in this section ranging from how the company use budget on the performance of business operation to how budget is used as co-coordinating tools in the organization among the various departments. 32 CHAPTER FOUR 4.0 DATA PRESENTATION AND ANALYSIS 4.1 DATA PRESENTATION The purpose of this chapter is to illustrate the effects of budgeting usage in planning and control of the resources of Stanmark Cocoa Processing Company Ondo and other manufacturing companies. The data gathered shall be logically presented and analyzed using statistical method of analysis. The choice of this approach was due to the fact that the data gathered deals with operational procedure and usage of budget as they affect planning and control. The whole data and information obtained from various sources were critically compared and analyzed. For the purpose of this write-up data were gathered in three parts namely: questionnaire, interview and personal observation. Questions and answers are presented and analyzed in groups. QUESTIONNAIRES These questionnaires were administered to the company officials. A total of (45) forty-five questionnaires were given out and only (40) forty were returned. Questions were asked to ensure that the data were obtained from competent sources especially heads of departments. 33 BUDGETING EXPERIENCE Enquiry was carried out to determine how long these manufacturing companies have been using budget for planning and control of their operations. The aim of the enquiry was to determine the length of time these manufacturing companies has budget immediately Stammark Cocoa Processing Company’s commencement of operation. QUALITY OF BUDGETING STAFF Questions were asked to evaluate the quality of staff involved in the preparation of budgets. The manufacturing company claimed to have a budget committee, budget manual as well as budget officers. They also claimed that those involved in the preparation of budgets are reasonably exposed to training program. BUDGET APPLICATION Stammark Cocoa Processing Company and other manufacturing companies that is cocoa processing company use the budget for planning and control in the functional areas and others. BUDGET FACILITIES Questions were also asked to know whether the manufacturing companies have extended budget facilities to their various departments. The importance of budget were felt in all their departments (Participating Budgeting). 34 4.2 DATA ANALYSIS Data gathered was logically presented and analyzed using statistical method of analysis, the data that has been artificially examined and analyzed with the adoption of descriptive analyzed techniques. The choice of this formula was due to the fact that was gathered, it deals with the operation procedure and usage of budget as they affect planning and control. The following presentation represents the way of preparing the budgets of Stammark Cocoa Processing Company which stated its operation with a budgeting based manufacturing system with the use of budget in all aspects of the company’s operations. However, the company improved in their services and this positively encouraged the suppliers and distributors of the company. 4.3 TEST OF DATA ANALYSIS With reference to the research hypothesis formulated in the earlier chapters of this write-up, this chapter was devoted principally to testing the research hypothesis. As a result of achieving our aim, questionnaire was designed as contained in the Appendix. The hypothesis will now be tested based on (45) forty-five questionnaire sent-out by the research scholar, completed and returned by the competent respondents. Forty questionnaires were returned out of the total that was produced. 35 HYPOTHESIS 1 QUESTION 8 TABLE 1 SECTION B: AGE DISTRIBUTION Responses on whether the team is responsible for planning and control function effectively by using budget? AGE 18-25 26-35 36-45 46 RESPONSES & TOTAL ABOVE YES 8 _ 16 8 32 NO _ 8 _ _ 8 TOTAL 8 8 16 8 40 Source: Questionnaire administered From the above table, all the respondents that said “YES” is greater than that of those that said “NO”. This means that 80% of the respondents have a positive opinion that the use of budgets during planning and control in manufacturing organization is effective and 20% say that budgets are not being widely utilized. 36 HYPOTHESIS 2 QUESTION 3 TABLE 2 Responses on whether the required, qualified and competent staffs are employed? AGE 18-25 26-35 36-45 RESPONSE 46 & TOTAL ABOVE YES _ 8 _ _ 8 NO 8 _ 16 8 32 TOTAL 8 8 16 8 40 Source: Questions administered From the above table, all the respondents that said “NO” is greater than that of those that say “YES”. This means that 80% of the respondents have Negative Opinion “that required and competent staffs are not employed and 20% say that competent staffs are employed. 37 HYPOTHESIS 3 QUESTION 3 TABLE 3: Responses on whether proper budgeting is the only good means of improving the activities of the organizations? AGE 18-25 26-35 36-45 RESPONSE 46 & TOTAL ABOVE YES 8 8 5 11 32 NO _ 5 3 _ 8 TOTAL 8 13 8 11 40 Source: Questionnaire administered The table above shows that 80% of the respondents are of opinion that the use of proper budgeting is the only good means of improving the organization while 20% did not agree with this. The majority of populations agreed that when proper budgeting is adequately it will improve the productivity of the organization. 38 HYPOTHESIS 4 QUESTION 4 TABLE 4 Responses on whether the successfulness of budget implementation depends on the laid down management policies? AGE 18-25 26-35 36-45 RESPONSES 46 & TOTAL ABOVE YES _ 8 _ _ 8 NO 2 10 12 8 32 TOTAL 2 18 12 8 40 Source: Questionnaire administered Judging from the above table, the hypothesis “that the successfulness of budget implementation depends on the laid down management policies” should be rejected since the number of respondents which said “NO” constitutes 80% of the total respondents. 39 HYPOTHESIS 5 QUESTION 20 TABLE 5 Responses on whether the budget reports are not sent regularly to the appropriate quarters? AGE 18-25 26-35 36-45 RESPONS 46 & TOT ABOVE AL ES YES _ _ _ _ _ NO 6 10 14 2 40 TOTAL 6 10 14 2 40 Source: field survey, August, 2014 Since all the respondents said that budget reports are not sent regularly to the appropriate quarters, it should be rejected. 40 HYPOTHESIS 6 QUESTION 23 TABLE 6 Responses on whether the proper activities of the budgeting are the only good ways of improving the productivity of the organization? AGE 18-25 26-35 36-45 RESPONS 46 & TOT ABOVE AL ES YES 12 20 6 2 40 NO _ _ _ _ _ TOTAL 12 20 6 2 40 Source: Field survey, August, 2014 Judging from the table above, the hypothesis “that proper budgeting is the only good Means of improving the activities of the organization” should be accepted since the number of respondent which said “YES” constitutes 100% of the respondents. The hypothesis had been tested and analyzed using different questions as contained in the questionnaire and various conclusions were made. Close observation 41 and study showed that budgeting is a must for manufacturing organizations. Different questions were framed from the relationship of budget and other different economic situations that prevail at a particular time. Conclusively, adequate budget must be made for resources of the organization. IMPROVEMENT IN OPERATION Enquiries were made whether there has been noticeable improvement in their operation during the use of budgets. All answers were positive. EFFICIENCY OF SERVICE In other to determine whether the organization was responding to the customer’s orders promptly and efficiently. most of the respondents claimed that the organization was meeting the customer’s purchase orders regularly. INTERVIEW In other to increase the depth of the study as well as to verify some of the answers given in the questionnaire, interviews were also conducted. The responses gotten from the interviews and the questionnaires were however in conformity with each other. Stammark Cocoa Processing Company used budgets in its planning and control operations while some companies still do not use budget in planning and controlling 42 their operations .Such companies blamed themselves for non-adherence to the budgets principally on inefficient management and the inflationary trend in the country. Stammark Cocoa Processing Company also registered complaints of inadequate reports on budgets due to lack of acquired technical skills. PERSONAL OBSERVATION This also helped in verifying some of the claims of the respondents. On the average it was observed that wastes were reduced as a result of supervision. 4.4 INTERPRETATION OF DATA ANALYSIS The six research hypothesis formulated and tested showed that three (3) out of them were rejected while only three (3) of them are accepted. This is to point out that hypothesis 2,4 and 5 were rejected, only hypothesis 1,3 and 6 were accepted. Moreover, the first hypothesis that budgeting is not widely used by the organization during planning and control was tested and rejected. 43 CHAPTER FIVE 5.0 SUMMARY, CONCLUSION AND RECOMMENDATION 5.1 SUMMARY A lot of observation and comments had been made on the importance of budget in an organization “scholars said that budgets are been used to assist in management major areas in the organization. Therefore, it has become necessary in order to determine whether budget is underutilized in the manufacturing industries despite the immense benefit derivable from the optimum utilization. Budgets offer unlimited opportunities to the management and should be recognized as potential profit increasing tools. Therefore, we should have self-confidence and positive outlook of the utilization of budget since fact generated through budget have become indispensible to successful management. In light of the above, this write-up examines the significance of budgeting as an instrument of planning aid control in organizations. 5.2 REPORT OF FINDING Critical analysis of the questionnaire, budget literatures, personal observation and interview showed some important findings deserving thoughtful considerations. These were delineated below. From the afore-stated analysis, it was found out that 44 overwhelming majority of the staffs in the organization strongly agreed that a good budgeting system gave directors the knowledge to correct where necessary. They share the belief that the most important aspect of human element in budgeting system could not be over emphasized as a tool of planning and control in organization. There were the general agreements amongst the staff that a good budgeting system should spell out the organization’s objectives in financial terms. Hence, a good budgeting system should be in quantitative terms rather than qualitative terms. Finally, there was a general consensus of opinion amongst the respondents that organization goals should not be implemented without consideration for the congruence of the organization goals and aspiration of the individuals within the organization. The presence of conflict between individual goal and corporate goal is bound to have negative effect on the implementation of the budget and hence render budgeting control ineffective. 5.3 CONCLUSION Budgeting system is an instrument of planning and control in manufacturing company. It is apparent that budgeting methods are quiet- essential, forward looking as they provide yardstick for compensation purpose. There are myriad of problems of budgeting in a manufacturing company of Nigeria economy such as, fluctuation in the economy, political instability inflationary 45 trends, authorization of responsibility, the control and implementation of budgeting. Thus, budgeting is an interminable and brain storming exercise since it is a plan of operation for a definite period in the future. Some companies in Nigeria today like Stanmark Cocoa Processing Co. Ltd Ondo town, for example are facing the problem raised by expansion through increased sales and introduction of new products. On the other hand, many are encountering the problem of contraction due to the interaction of substitute products. Therefore, it is essentially important that management should be in a right position to plan ahead and control the metamorphosis level of organizational activity that must be carried out so that the objectives of an organization can be met. Finally, there is need to mention therefore that budgetary control is an off shoot of decision making process and identified as instrumental to effective management decision making in the manufacturing companies like Stanmark Cocoa Processing Company Limited, Ondo State, Nigeria. 5.4 RECOMMENDATIONS AND SUGGESTION As a result of the afore-mentioned findings of the research work the following recommendations were suggested. If they are strictly adhered to there is surely going to be successful changes in the area of budgeting as a tool for planning and control. 46 This will in turn increase the sales and consequently the profit of an enterprise. In other words the benefits that are accrue from budgeting will automatically accrue to Stanmark Cocoa Processing Company limited and other manufacturing companies. 1. The accounting system must be supportive and effective that is, actual result must be capable of being measured and compared with the budget at a regular interval. 2. Adequate recognition should be given to budgeting in every organization so as to provide an organized procedure for the future planning of earning whereby, the organization plan would be reviewed and changed where necessary. 3. The system should be operated to assist motivation and not simply used as a ‘’big stock’’ or a pressure devise, corrective action is initiated to ensure that future performance is in accordance with budgets. Action may involve motivating people to implement policies, modifying certain policies, retaining employees or changing the manufacturing methods. The budget will have to be revised if the deviation is due to incorrectly set budget, 4. The budgeting must have the active and full support of the business owners. The participation of the budget planner is highly essential during implementation stage. Moreover, there must be due recognition for participating approach for the implementation of budget to be successful. 47 5. Then forecast figure must be realistic otherwise, budgeting system can fall into disrepute. 6. The budgeting system should better be developed gradually so that management can have time to understand and use the system effectively for planning and control. 7. The principle of management by objective (MBO) should be applied while enforcing control through budgets. No action or intervention is needed as long as the actual performance approximately conforms to the budgets. Management intervention should be focused exceptionally on significant deviations; control limit that budget should be developed. The management should not rate the employee in the organization by creating a climate of cost consciousness in which they will be stimulated to strive to attain the stated goal. 48 BIBLIOGRAPHY Adam, R.A. Public Sector Accounting and Finance made simple, Lagos, Corporate Publisher Venture (2004) Adeniyi, A.Adeniyi, An insight into Management Accounting, Lagos, Eitoda venture ltd (2004) Ajayi, O.A, Odetayo, Financial Management, Ibadan bash Moses Printing Ltd (2001) Fayemi, O.A. Solution to Public Sector Accounting Problem, Lagos hand mark publication ltd (2003) Akande, A.A. Theory and practice of Management Accounting FrankBap prints, llesa. (2006) Abggris O.K. Impact of budget on people: 1ST Edition the Controllership Foundation Ltd Scotland (2007) Cohn Drury R.J. Management and Cost Accounting Acford Ltd. Chichester Great Britain, (2000) 49 Gloffery .k.p. practice Cost and Management Accounting 2nd Ed. PAN Publishers Limited, London. (2000) Haper .W.M. Costing and Management Accounting, 3nd Ed. Mac Donald’s and Evans Ltd, London. (2000) James lafferertyl F.W. Accounting: 5th Ed, Pitman Book Limited, London. (2000) Lonye, O.P, Bamidele, M.M Raimi, O.O. Public Sector Accounting and Government Accounting Published by Freeze Nigeria ltd. (2009) Lucey, t. Management Accounting London, DP Publication. (2002) Odetayo, T.A. Cost Accounting, an Easy Way, Ibadan, Ejon Publication.(2002) 50 Robert Antony. N. and John Deardan. Management Control System, 3rd Ed. Homewood. N Richard D.Limited. New York. (2000) Simon Ibitoye. G.B. Handbook of Budgetary Control; 1st Ed Graham Burn Publisher’s Ltd, London. (2000) 51 APPENDIX Crown Polytechnic, School Studies, of Business Department P.M.B 5424, of and Financial Accountancy, Odo, Ado Ekiti, Ekiti state. Dear Respondent, QUESTIONNAIRE I am a final year HND Accountancy student of Crown Polytechnic, Odo, Ekiti state conducting a research on budgeting as a tool for planning and control in organization, with Stanmark Cocoa Processing Company Ondo State as a case study. You are hereby enjoined to fill in the attached questionnaire. Be assured that any information given here will be treated with utmost confidence. Thanks for your cooperation. Yours faithfully, Ewutanure Justina .E. 52 QUESTIONNAIRE The questionnaire is divided into sections. Please mark ( ) in the appropriate boxes below to indicate correct response to the questions. SECTION A: Personal Data 1. SEX: Male ( ) Female ( ) 2. AGE DISTRIBUTION: 18-25 ( ) 26-35 ( ) 36-45 ( ) 46 & Above ( ) 3. QUALIFICATION: NCE/GCE/ AL/ ( ) HND/BSC ( ) MSC/PHD ( ) ACA/FCA ( ) 4. WORKING EXPERIENCE: Below 5 years ( ) between 5 and 10 years ( ) 5. POSITION IN ORGANIZATION: Top level management ( ) managerial level ( ) officer/supervisor ( ) clerk ( ). 53 SECTION B (GENERAL DATA) 6. Your company complies with budgeting procedures? YES ( ) NO ( ) 7. Your team is responsible for planning and control functions effectively by using budget? YES ( ) NO ( ) 8. In your organization, budgeting bring about comparability and conformity of financial statement? YES ( ) NO ( ) 9. In your company, the required qualified and competent staffs are employed? YES ( ) NO ( ) 10. In your organization the existence of budget committee hamper the effectiveness of the budgets? YES ( ) NO ( ) 11. Had there been any cause for deviation from budgets? YES ( ) NO ( ) 12. In your organization the success of budget implementation depend on the laid down management policies? YES ( ) NO ( ) 13. In your company does the financial controller solely responsible for coordination and controlling the budgets? YES ( ) NO ( ) 14. Does your company operate fixed budget alone? YES ( ) NO ( ) 54 15. In your company, is there any section responsible for planning and control? YES ( ) NO ( ) 16. Does your company have a good budgeting control system? YES ( ) NO ( ) 17. In your company, does budgeting system give direction to correction? YES ( ) NO ( ) 18. In your company do you believe that budget reports are sent regularly to the appropriate quarters? YES ( ) NO ( ) 19. Do you agree to the belief that the impact of human element in budgeting system cannot be over emphasized? YES ( ) NO ( ) 20. In your company budgeting shows the degree by which actual results varies from the standard. Do you agree? YES ( ) NO ( ) 21. In your company do you believe that proper budgeting is the only good ways of improving the activities of the organization? YES ( ) NO ( ) 22. Do you agree that a good budgeting system spells out the organization objective in financial terms? YES ( ) NO ( ) 55 23. Do you agree that budget serves as a tool for planning and control system in the organization? YES ( ) NO ( ) 56