Issues and Applications Budgeting in Manufacturing Companies
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Abstract on Issues and Applications Budgeting in Manufacturing Companies
This research hopes to examine and to give a definite due on issues and applications budgeting in manufacturing companies. However, budget has become a major tool needed generally in all aspect, for instance budget itself is a projection of the flow of funds and how such funds will be spend to achieve value objective and it can also be see as a future plan of action. The research will appraise the extent of realization of budgeting objectives and relevant problem encountered in realization of such budgeting objectives.To facilities the investigation, three manufacturing companies were visited viz Sunrise Flour Mill Ltd, Emene Nigerigas Ltd. Emene and Anambra Vegetable Oil Products Nachi, Udi Local Government Area.
Chapter One of Issues and Applications Budgeting in Manufacturing Companies
The government intention and policies describe on paper through a financial plan with detail estimates of receipts and propose expenditure clearly under various head is known as a budget.
In other words, a budget is a project of the flow of funds and how such funds will be spend to achieve value objective, which may be of individual, household, business firms, government and institution. It can also be see as a future plan of action. Stating in detail the anticipate revenues and expenditures during an accounting period to meet the organizations objectives. It usually contains of anticipate income, spending for the upcoming/accounting year and recommendations.
Therefore, a budget is a financial plan, which typically contains a detail estimate of expenditure, revenues and surplus or deficit for the present and succeeding fiscal years.
The budget is more than an accounting statement of propose expenditures and anticipate revenue, however, it contains the fruits of conscious policy decision about the kinds as well as the amounts of expenditure and revenue. Budgetary policy in fiscal policy direct attention specifically to questions involving activity within the framework of budget document.
There are two essential aspect within the budget framework and these are: the capital and recurrent estimates. The recurrent includes revenue and recurrent expenditure. Under this category, we have items which pave way for the smooth running of government policies d they are usually of consumption nature examples are salaries and purchase of stationer. Note this maintenance of infrastructure also come under recurrent budget.
BACKGROUND INFORMATION OF THE STUDY
The term budget is see differently by different people due to their areas of specialization for instance, a documents see budget from the preparation perspective, managers on the other hand see it from the implementation perceptive, still, behavioural scientists look at it from the human implication perspective.
Therefore, if budget is to obtain the best functional result all these diverse view point must be harmonize.
Basically, a budgeting system enable managers to plan, coordinate, control and evaluate the activities of the business more effectively. Planning involves establishing objectives in advance so that members of the organization will have specific activities i.e direct goals to guide their actions. Hence, budget enable the overall objectives of the organization to be translated into detail plan of action.
The budget as an instrument of economic policy have more vary of functions. First, in policy terms, it indicates and expresses intention regarding the utilization of the country’s resources. In operational terms, it leads to the determination of natural growth and investment goals and promotes macroeconomic balance in the organization, thereby the standard of living of the employees.
Achieving the lofty objectives of the budget require adequate understanding of the modalities or approaches are integrate in the techniques adopt in the preparation of the budget document.
The knowledge of budgetary techniques could enable the administration.
Hence, the essence of foregoing is to exposes students and policy makers of conceptual budgetary issues which are not only germane to the preparation, but also to be implement of budgets.
Though there are many types of budgets however, the following account for budget type and style.
The major purpose of having budgets.
The type of organization using the budgets.
The personalities of people handling the budget.
The personal characteristics of people subject to budget direction.
STATEMENT OF PROBLEMS
Budgeting is a plain express in quantitative terms planning is futuristic in nature, and the future is subject to change.
Therefore to quantitatively state the future is an estimate or at least approximation of the future events plan for. Hence, the first problem of budgeting is either under or over approximation. This is variances sometimes, the variance may be totally off the ranger making its use of control purpose difficult. This situation is very common in Nigeria in these years of National Economic Empowerment Development Scheme (NEEDS) where:
The rate of inflation is hard to predict so this budgeting for price level see to be large less a guesswork Ibid.
The volume of activity cannot be foresee with certainty as unforeseen limiting factors (mostly government policies) arise to restrict output below budget level. Mayo (1990 pg. 102).
Budgeting is holistic it encompasses an aspects of an organization activity such that any problem at one point of it generates multiple effects due to this it feared that:
“There will be problems of organization and attempts to coordinate the plans of different departments into an optimal master budget may be unsuccessful”.
The human element in budgeting increases it probabilistic nature. These may strike due to inadequate motivation and bottlenecks due to uncoordinated departmental activities.
Inadequate motivation is say to have always be a problem of budgeting since different workers are motivate differently according to their different needs. This problem of motivation is made worse by the excessive loss of the purchasing power of the naira in the foreign exchange market. This is because financial incentive is believe to be the main motivational method desire and practice in Nigeria.
“When the level of education is low and where skilled manpower is in short supply the highest level of aspiration of many workers remains with the range of satisfying the lower level needs, which more often then not is economic (Ejiofor and Aniagoh 1994).
OBJECTIVE OF THE STUDY
This research aims at accomplishing some objectives. It will examine and highlight the roles and problems of budgeting and also assess the impact of certain unforeseen variables and inflation on the usefulness of budgeting in manufacturing firms in Nigeria. To achieve these, the research have to:
Ascertain the system of budgeting in manufacturing firms.
Ascertain the roles of budgeting in manufacturing firms.
Identity the problem of budgeting in manufacturing firms and the reasons for the existing problems.
Ascertain whether budgeting accomplishes it roles in manufacturing firms.
Appraise the roles of budgeting situation of frequent erratic changes.
In pursuance of the above objectives of study the following hypothesis are tested.
Budgeting is an indispensable management tool.
The roles and problem of budgeting do not change in accordance with the nature and size of an organization.
Improper planning and control of budgeting may give rise to some fundaments problems relating to joint responsibility target setting and slacks.
SIGNIFICANCE OF THE STUDY
This research have varying levels of relevance to various categories of its users such as the researcher. Therefore among other things this study will.
Afford the research a better understanding and appreciation of the subject matter, couple with the roles and problems of budgeting in manufacturing companies.
Provide beneficial insight to the nature and problems of budgeting to managers accountants and manufactures alike further it will enhance effective budgeting in their respective organization.
SCOPE OF THE STUDY
The study is intend to cover a detail and quantitative analysis of the problems and roles of budgeting in manifesting companies. As a background for this analysis, a quantitative review of the problem will be given proper attention, couple with a quantitative review of the industry as well as the company forming the bases for analysis.
LIMITATION OF THE STUDY
This research is constrain by:
a.Poor responses from respondents: A considerable number of the respondents nurse the fear of being expose or rather expositing the company to undue inter-company competitor may gather from their responses. This fear was general to most of the respondents at AVOP. Niger gas Emene and Sunrise Flour Mill Ltd. Emene and other companies visit. This made the collection of relevant data show the difficult.
b.Time: There is little or no time to conduct compile produce and submit this project academic and household chores have a share of the limit time available.
Moreover, several calls were made to the companies and ministry of commerce and industry trying to get the interviewees response to questions at their convenience. These calls consume more than budget. Infact tune constraint is the principal limiting factor of this research. Hence, it had a primary affection on this research by way of procrastination. Inspite of the aforementioned limitation, the research made use of the available resources and time to achieve the objective of the research.
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