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Cost Accounting Models As Tools For Managerial Decision Making
[A CASE STUDY OF NIGERIA BOTTLING COMPANY PLC, ILORIN]
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The accounting system is the major quantitative information acquired in almost every organisation and it therefore provide information for three broad purposes namely: internal reporting to managers for use, in planning and controlling routine operation and non-routine operations. Formulation of major plans and policies and finally external reporting to stockholder, government, debenture holder and other outsides parties.
Manager depends largely on quality and quantity of data received. Thus, information flows on the management information system influence the effectiveness of decision – making.
According to “HORNGEN†the question of what accounting system to business most focus on how decision and consequent benefits are going to be affected. One must ask what decision will result from accounting data and what outcome will ensure from decision making.
Accountants continually work with accounting system and financial reports, which are financial model of company operations. Models are useful because they provide a conceptual representation of realities, enabling the decision maker to anticipate and measure the effect of alternative actions.
Decision- making is choosing among alternatives, it occurs as managers perform their planning and controlling function. A decision model is one, which, in effect performed by management planning and controlling function, but only extent that management delegates, when the model was constructed and implemented.
In most organisation, the accountant is the quantitative expert, and to retain and improve his status, the accountant should be aware of the mathematical models may improve planning and control. And also strength and weakness, when comparing and evaluating the quantitative sources of decision recommendation, as the accountant is usually a member of the top management team in these organisation.
According to “Thieraof†generally a model is defined as a representation of an actual object or situation. A formal decision model measures the predicted effect of alternative actions.
However, it is pertinent to note that according to the report of the committee on management decision models, a mathematical decision model may indicate a choice which is rejected by management because of more dominant legal, sociological, psychological, political and other consideration not include in the specific. In such instances, the output of the mathematical model is only one input into a more completed decision model, which includes qualitative as well as quantitative dimension.
1.2 STATEMENT OF RESEARCH PROBLEMS
Industries over the years glad seen cost accounting model as a tools for managerial decision making which results to modern accounting system that have been effective and efficient.
Since cost accounting has been described as the tools that facilitates the measures which predict the effects of attentive actions and yet, the management has not base their decisions making on the effects predicted over the alternative action.
Secondly qualified cost accountant has not been fully employed for them to show their skills in the field and this has led to bad effects in the running of the industry.
Moreso, the researchers also discourage the up-coming cost accountant by collating, analysizing and distributing wrong data to them thereby disqualifying them from gaining employment in regards to this field.
1.3 OBJECTIVE OF THE STUDY
Though there are other various sources of information for management decision-making, cost accounting models in particular and ensure cost control.
Cost accounting renders useful information to decision making for proper planning evaluation and control. Some of the information rendered comprises:- forcasting of product costs of an order, budget preparation, determination of standard cost and analysis of variances, budget preparation, determination of standard cost and for proper cost identification. The major objectives of cost accounting includes:
• Cost classification and codification
• Implementing cost control and cost reduction programme in such a way as obtain efficiency of operation.
• Determination of product price
• Determination of breakeven point, cost – volume profit relationship, marginal cost etc.
• Ascertainment of closing stock
• Disclosure of profitability for each product or for each segment.
• Assisting managerial personnel in decision making process.
• Cost classification and codification for the purpose of easy identification.
1.4 significance of the study
Any decision maker should have at his disposal, the best qualitative and quantitative tools which are available, so that he may establish a frame of reference for the decisions. Past literature on the research have been too general without giving special consideration to the bottling company and in fact, have been too theoretical.
This research is therefore intended for use by managers and accountancy especially in the bottling industry in implementation of decision – making task in a more efficient manner and also to serve as a pointer to anther research on the topic.
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