Accounting Project Topics

Strategic Management Accounting and Profitability of Firms in Nigeria

Strategic Management Accounting and Profitability of Firms in Nigeria

ABSTRACT

The purpose of this study was to investigate the effects of strategic management accounting on profitability of manufacturing firms with a special focus on manufacturing firms in Lagos, Nigeria.

The research design employed in this study was descriptive in nature. For the purpose of this study, the target population consisted of 183 firms where the top, middle or low level management staffs were involved. The simple random sampling was representative of the population and offers an unbiased selection which was important in drawing conclusions from the results of the study. The sample captured 30% of the manufacturing firms in the sampling frame. The research issued a total of 54 questionnaires, out of which 42 were filled and returned, thus giving a response rate of 78%. Primary data collection was via a questionnaire as this was an efficient and convenient way of gathering the data within the resources and time constraints.

The study established that the company adopted activity based costing as a management accounting practice. It was also established that activity based costing affected profitability. Most of the company has better insight for benchmarking and budgeting with ABC system. It was also established that ABC helps to identify inefficient products (value destroying), departments and activities and helps to allocate more resources on profitable products.

It was concluded that most firms in the manufacturing sector have adopted the use of activity based costing, standard costing, life cycle costing and target costing. The findings also show that ABC helps to identify inefficient products (value destroying), departments and activities and helps to allocate more resources on profitable products. In addition, there is a high rate of centralization and coordination.  Most manufacturing firms have adopted budgeting practices as a management accounting practice and budget participation, budget process, budget planning also affect profitability.

It was recommended that there is a need to create awareness on the impact of activity based costing on profitability of manufacturing firms in Lagos. The institutions also need to put up clearly specified goals and objectives in order for activity based costing in to be effective in the company.

 

Chapter One Summary

The study would show the strategic management accounting that play a part in the financial health of a firm through improving profitability. It would also help organizations and competitors become aware of the tools, methods and techniques available to them in a bid to control costs and maximizing profits. The findings of this study would also be invaluable to manufacturing firms in Nigeria as they would be able to understand vividly the role that of strategic management accounting play on profitability. The recommendations given in the study would help the manufacturing firms as well as other sectors in Nigeria by equipping them with adequate tools to get the solutions to the problems posed by the identified aspects.

Chapter Two Summary

Performance refers to outcomes, end results and achievements arising out of organizational activities. According to Carton (2004), performance refers to the metrics relating to how a particular request is handled, or the act of performing; or on the other hand accomplishing something effectively; utilizing information as recognized from simply having it. Griffins (2006) defines firm performance as the measure of standard or prescribed indicators of effectiveness, efficiency, and environmental responsibility such as, cycle time, productivity, waste reduction, and regulatory compliance. According to Rickard and Kono (2013), organizational performance encompasses three specific areas of firm outcomes which include profitability (profits, return on assets and return on investments), product-market performance (sales and market share) and shareholder returns (total shareholder return and economic value added).

Chapter Three Summary

A research design is a plan for selecting subjects, research sites and data collection procedures to answer the research questions. Cooper and Schindler (2011) defined research design as a general framework that outlines how the researcher would go about answering the research questions. Descriptive studies describe characteristics associated with the subject population. Descriptive research design was used to establish the effects of strategic management accounting on profitability of manufacturing firms in Nigeria with a focus on manufacturing firms in Lagos. This was relevant in describing certain variables of interest such as profitability, effects of activity-based costing, budgeting practices and cost-volume profit analysis on the profitability of manufacturing firms in Lagos.

The major purpose of adopting descriptive design method is that it measures the accuracy of the variables. The following part talks about the exploration technique which covers the examination structure, populace, test, information accumulation strategies, look into systems and information investigation techniques.

Chapter Four Summary

To analyse the literacy levels the result established that majority of respondents accounting for 45% were Diploma holders while 26% had a Bachelor’s degree.

Additionally, certificate holders were 17% and Master’s degree holders represented 10% while PhD holders accounted for 2% as shown in Figure 4.4 below. This implies that the response received was precise as the respondents were very literate to comprehend the questions asked.

Chapter Five Summary

The purpose of this study was to investigate the effects of strategic management accounting on profitability of manufacturing firms with a special focus on manufacturing firms in Lagos, Nigeria. The research questions in the study were: What are the effects of activity-based costing on the profitability of manufacturing firms in Lagos? How do budgeting practices affect the profitability of manufacturing firms in Lagos? What are the effects of cost-volume profit analysis on the profitability of manufacturing firms in Lagos?

The research design employed in this study was descriptive in nature. For the purpose of this study, the target population consisted of 183 firms where the top, middle or low level management staffs were involved. As such the main respondents were general managers, finance managers, sales managers, finance business partners, chief accountants, factory controllers, finance controllers, cost accountants and their respective assistants or representatives in the manufacturing firms. The simple random sampling was representative of the population and offers an unbiased selection which was important in drawing conclusions from the results of the study. The sample captured 30% of the manufacturing firms in the sampling frame. Primary data collection was via a questionnaire as this is an efficient and convenient way of gathering the data within the resources and time constraints.

References

  • Abdel-Kader, M. & Luther, R. (2006). Management accounting practices in the British food and drinks industry. British Food Journal, 336-357.
  • Abdullahi, R. (2015). The impact of firm characteristics on management accounting practices: A UK-based empirical analysis. British Accounting Review, 40(1), 2-27.
  • Abogun, M. G. & Fagbemi, B. (2011). Performance management in NGOs: evidence from Nigeria. Available at SSRN: http://ssrn.com/abstract=1909863 (Accessed 12/08/2018).
  • Adenji, A. A. (2008). Management Accounting. (4th Ed.). Lagos, NI: El-Toda Venture Limited.
  • Adler, R., Everett, A. M. & Waldron, M. (2000). Advanced management accounting techniques in manufacturing: Utilization, benefits, and barriers to implementation. Journal of Economic Management, 1(4), 1145-1159.
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