ABSTRACT
The topic of this research study cost-volume profit analysis as a management tool for decision making (A case study of Nigeria Breweries, Plc). A lot of problems evoke the researchers interest to carryout the intellectual study of this nature. Problems raised by expansion through increase sales and the introduction of new products. Many are facing problem of contraction due to the introduction of substitute materials, products or reduced demand for their products. The main objectives of this research work was to look at the examine some other techniques that help in the decision. To identify problems encountered in the practical application of cup analysis and suggest possible solution. To highlight the superiority of using cost volume profit over forms of techniques. Data were collected through the use of questionnaire and personal observation was also used. Data used were computed through the use of frequency (f) and percentage (%). The major finding of the study are: A part from cost-volume profit analysis, the company uses other techniques or employs other techniques in decision making which include standard costing, budgeting and budgeting control, cash flow analysis and capital budgeting. Additional findings, include the enhancement of efficiency and effectiveness of the company’s operation. It was discovered that cost volume profit analysis provide management of Nigeria Breweries Plc with costs and profit data for profit planning here cup analysis is an important tool in short term planning. In conclusion cost volume profit analysis is a powerful indispensable tool that helps management in the march toward achieving the profit objectives. To ensure continuous profitability, the growth of the Nigeria Breweries Plc, the entire management should ensure a continues uses of cost volume profit analysis as a management tool for decision making.
TABLE OF CONTENTS
Title page ii
Dedication iii
Acknowledgement iv
Abstract v
Table of contents vi
CHAPTER ONE
- Introduction 1
1.1 Background of study 1
- Statement of the problem 3
- Objectives of the study 4
- Significance of the study 5
- Research Questions 6
- Research Hypothesis 7
- Scope and Limitation of the study 8
- Definition of Terms 9
CHAPTER TWO
- Literature Review 11
2.1 An Overview of Cost-Volume-Profit Analysis 11
- Cost-Volume-Profit Limitations 13
- Break-Even Analysis A Traditional View of the 16
Cost-Volume-Profit Relation
- Graphical Approach to break-even Analysis 17
- Formular method of finding break point 23
- The multi- product cost-volume-profit analysis 30
- Decision making function 36
- Other tools for decision making and control 39
Reference
CHAPTER THREE:
- Research Design and Methodology 56
3.1 Sources of data 56
- Primary sources of data 57
- Secondary sources of Data 58
- Population and sample size determination 59
- Method of data collection 61
- Method of validating the instrument 62
- Method of data analysis 62
CHAPTER FOUR:
- Data Presentation, Analysis and Interpretation 65
4.1 Preliminary information 66
- Data analysis 66
- Testing and interpretation of hypothesis 72
CHAPTER FIVE
- Summary of Findings, Conclusions and Recommendations 77
5.1 Summary of Findings 77
- Conclusions 79
- Recommendations 80
Bibliography
Appendix
CHAPTER ONE
- INTRODUCTION
1.1 BACKGROUND OF THE STUDY:
Orjih (2001), defined cost-volume-profit analysis as “specific way of presenting and studying the inter-relationship between costs, volumes and profits”. According to him, it provides information to management in a most lucid and precise manner. It establishes a relationship between revenues and costs with respect to volumes. It indicates the level of sales at which costs and revenue are in equilibrium. This equilibrium point is commonly known as Break even point. The break-even point is the point of sales volume at which total revenues is equal to total costs. It is a point of zero profit.
According to Brown et al (2007), “some industries today are encountering problems raised by expansion through increased sales and the introduction of new products. Many on the other hand are facing problem of contraction due to the introduction of substitute materials, products or reduced demand for their products. Whichever is the case, it is vitally important that management should be in a clear position to plan for these changing levels of activity”.
Apart from the problem of contraction and expansion, during the period of economic depression, a business may be faced with the alternative of closing down or selling its products at a price below the total cost. Also profit planning and control is made more difficult by the changes in the general pattern of demand for the type of products offered and the action of competitors.
In order to solve the problem created by the above situations, profit planning, cost control and decision making require an understanding of the characteristics of costs and their behaviour at different operating levels. One of the most important tools developed by accountants to assist management in meeting these challenges is cost-volume-profit analysis.
- STATEMENT OF THE PROBLEM:
This study entitled “cost-volume-profit analysis as a management tool for decision making” goes to suggest how the application of cost-volume-profit analysis has helped managers in making decisions of the firm to ensure its growth and survival.
The challenges facing management are enormous particularly during this period of economic depression and they are as follows:
- Management is faced with the problem of how to make use of the available scarce resources in order to achieve the objective of profit maximization.
- Advanced state of competition and rivalry where only the fittest enterprises survive.
- Shortage of funds to buy the needed raw materials.
- Low capacity utilization.
- OBJECTIVES OF THE STUDY:
The research will be focused on cost-volume-profit analysis as a management tool for decision making (A case study of Nigerian Breweries Plc).
The purpose of the study will be:
(i) To evaluate the extent to which the use of cost-volume-profit analysis has helped in achieving the profit maximization of Nigerian Breweries.
(ii) To identify problems encountered in the practical application of CVP analysis and suggest possible solutions.
(iii) To examine some other techniques that help in decision.
(iv) To highlight the superiority of using cost-volume-profit over other forms of techniques.
1.4 RESEARCH QUESTIONS:
In this study, “cost-volume-profit analysis as a management tool for decision making” (A case study of Nigerian Breweries Plc) the following research questions come to mind: They are:
(i) Is Cost-Volume-Profit analysis used as a management tool for decision making in Nigerian Breweries Plc?
(ii) Has the application of the cost-volume-profit analysis helped Nigerian Breweries to be efficient and effective in its operations?
(iii) What other technique apart from cost-volume-profit analysis does Nigerian Breweries employ in decision making?
(iv) Are these other techniques superior to cost-volume-profit analysis?
(v) What problems do Nigerian Breweries encounter in decision making?
1.5 RESEARCH HYPOTHESES:
The hypothesis to attest to the questionnaire’s belief that cost-volume-profit analysis is a management tool for decision making can be tested as follows:
Ho: Cost-volume-profit analysis is not extensively applied in Nigerian Breweries Plc.
H1: Cost-volume-profit analysis is extensively applied in Nigerian Breweries Plc.
Ho: The application of cost-volume-profit analysis has not helped the decision making and growth of the firm.
H1: The application of cost-volume-profit analysis has helped the decision making and growth of the firm.
- SIGNIFICANCE OF THE STUDY:
This study, “cost-volume-profit analysis as a management tool for decision making” (A case study of Nigerian Breweries Plc) will educate the entire public on how cost-volume-profit analysis is an effective tool applied by managers in decision making in their firms.
This study will be of immense benefit to the following groups of persons:
(a) Business organizations especially Nigerian Breweries Plc.
(b) Cost Accountants and Financial analysts.
(c) Students of accountancy profession and other allied profession.
(d) Researchers on related study.
(e) The general public.
- SCOPE AND LIMITATION OF THE STUDY:
This topic, “cost-volume-profit analysis as a management tool for decision making” (A case study of Nigerian Breweries Plc) should have been intended to cover all the Nigerian Breweries located in different States of the Federation but the researcher intends to limit this topic to only 9th Mile Depot, Enugu State due to time constraints, distance and financial handicap. The study of Nigerian Breweries 9th Mile Depot Enugu shall also serve other States of the Federation since the same techniques are applied in other depots. Therefore, the researcher will rely heavily on the Nigerian Breweries 9th Mile Depot since they have adequate information data relevant to the study.
- DEFINITION OF TERMS:
- Cost: defined cost as “a measurement in monetary terms, of the amount of resources used for specific purpose.
- Profit Planning: “profit planning refers to the operating decisions in the areas of pricing costs, volume of output and the firm’s selection of product line”.
- Economixc Depression: This is a period when there is little economic activity and many people are poor without jobs.
- Cost Control: Cost control is “the regulation, limitation or confinement of cost”.
- Decision Making: Decision making is “the process of choosing among the alternative solutions available to a course of action or a problem situation.
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