THE INFLUENCE OF ACCOUNTING INFORMATION TOWARD DECISION MAKING IN MANUFACTURING FIRM

(A CASE STUDY OF CHAMPION BREWERIES PLC, UYO)

CHAPTER ONE

BACKGROUND OF THE STUDY

1.1       INTRODUCTION

In a manufacturing firm, the inevitable fact is that materials, trained personnel, proper funding and good management constitute the component part of accountability as a watch word and because of this in a day-to-day business affairs there is need for accurate and informative financial records and statement which are necessary in making sound decisions by the managers. It is based on this premise that accounting information comes in since it objective is to help managers determine whether a profit has been made, to know the amount of the assets on hand, the amount owned to creditors and amount of owners equity which will help them have a good timely and useful information.

However, accounting is said to be a system that measures business activities processes that information into reports and communicates these finding to decision makers, Harris (2002).

On the other hand, the series of activities which are limited and form a progression of steps beginning with observation, the collecting, recording, analyzing and finally communicating information to its users. This information helps managers to take proper decision and control operations. It serves as a decision tool and can only come from a well-designed and well-run accounting system. Although management is not involve in the details of day-to-day accounting procedures or end of period accounting procedures but the efficiency of these procedures has a major influence on the quality and promptness of the information they receives. Brock, Palmer & Cunningham (2001).

Therefore, accounting information in champion breweries is expected to have the essential quality of good and accurate financial transaction of the firm since it is the foundation on which the activities of their business depend on. Champion breweries plc was incorporated as a private limited liability company on the 31st of July 1974 within the name south east breweries limited because of political imperatives in Nigeria the company’s name was changed from south east breweries limited to cross rive breweries limited and thereafter to champion breweries plc. The latter name, champion breweries limited was changed to champion breweries plc on the 1st September, 1992.

On the 24th of November, 1974 the government of the then south eastern state of Nigeria signed an agreement with Messrs Haze Bravery.

GMBH of Hamburg, (technical partners) for the supply and construction of a turkey brewery in Uyo with a capacity of 150000 hectoliters. The foundation stone of the brewery was officially commissionable and its products Champion larger been launched into the market with success.

On the 22nd of July 197\97, a second contract was surged with the technical partners to increase the capacity of the brewery from 150000 to 50000 hectolitres. The foundation stone for the expansion was laid on the 24th of December 1977. The expansion, which incorporated more sophisticated machinery, was completed and put on trial, run in September 1979. The second production line was officially commissioned on the 11th same year the company’s products “Champion Leger Beer” and “Champion Malta” won silver  medal at an international medal for quality at the 16thworld selection for beers and non-alcoholic beverages in Luxemburg. Consequent upon pressure of demand for its product, million hectoliters. The third expansion, which gulped substantial resources, could not be realized. The non-completion of expansion program coupled with back of working capital and inadequate maintenance of the plants force the company to close its doors for business between 1990 – 1991. All subsequent reactivation attempts did not yield the desired results.

With the audient of democracy in Nigeria in May 1999, the government of Akwa Ibom state made the reactivation of the brewery a cardinal activity. Consequently, the Akwa Ibom State investment and industrial promotion council (AKIPOC) was charged with the responsibility reactivation the company person to this mandate, AKIPOC, in conjunction with the board of directors of the company went to the market to solicit for core investors/technical managers, in the process Messrs, Montgomery venture incorporated of panama (with offices in Geneva, Switzerlar) was identified and brought into the company as core investors/technical managers after a memorandum of understanding was signed.

Based on the memorandum, a reactivation committee was set up by board of the company to work with the core investors/technical managers for the revamping of the company. The reactivation process which commenced in February 2000, lasted about nineteen month, now the plant has been revamped and restructured to use one hundred percent locally sourced raw materials. The brewery is now fully operational and the capacity is 500000 hectolitres per annum. (Champion Breweries Plc 2001 Annual Report).

1.2       RESEARCH PROBLEM

The poor performance and failure of manufacturing companies in Akwa Ibom State may have been as a result of poor, application of management accounting information standards.

Manager in most manufacturing companies consciously do not use accounting information as a guide I making production and price decisions.

The lack of the use of accounting information will equally hinder the proper allocation of the organization scarce resources.

It should be noted that the compliance to the management accounting standard by the managers in decision making alone may not completely rule out the incidence of poor performance and failure in our industries but will do a great extent.

1.3       OBJECTIVES OF THE STUDY

This research work will help to find out the importance of accounting information and its relevance to the growth of the economy.

1. To examine the impact of this accounting information in running a well organized firm like champion breweries.
2. To determine how accounting information can of a manufacturing firm.

iii.         To determine factors that constrains or promotes the effective uses of accounting information.

1. To ascertain if there is any positive relationship between the effective use of accounting information and the quality of decision in manufacturing companies.
2. To make recommendations, which will enhance the employment of information provided by accounting system?

1.4       RESEARCH QUESTIONS

In carrying out this research work, the following questions were formulated as follows:

1. What are the importance of accounting information in a manufacturing firm.
2. How does accounting information effect the growth and goals attainment of the firm?
3. How does the influence of accounting information help in the achievement of corporative objectives of an organization?

4)         Do the managers in the company apply the accounting information in their decision?

5)         Is it necessary that accounting information is needed towards decision making in a manufacturing firm.

1.5       RESEARCH HYPOTHESES

The following null (H0) and alternative (Hi) hypotheses are formulated.

1. H1: Managers on manufacturing companies make effective use of accounting information in making production and pricing decisions.

            H0:       Manager in manufacturing companies do not make use of accounting information in making production and pricing decisions.

1. H1: The use of accounting information has led to a high level of profitability.

H0:       The use of accounting information has led to a high level of profitability.

            H1:       Accounting information helps in proper allocation of scarce resources.

            H0:       Accounting information does not help managers in proper allocation of resources.

1.6       SIGNIFICANCE OF THE STUDY

This study will be of immense importance to the public who in one way or the other will use it to properly organize the affairs of their business.

Also it will help to indent the understanding and appreciation of accounting firm as well as suggest ways that will enhance the effectiveness and efficiency of the firm.

Furthermore, it will be good interest to the management of Champion Breweries Plc, Uyo.

Finally, it will serve as a source of material or reference for further research work to other researchers in future.

1.7       SCOPE OF THE STUDY

The scope this research will be carried in Champion Breweries within Uyo metropolis with particular reference to the influence of accounting information or decision making in a manufacturing firm.

1.8       LIMITATION OF THE STUDY

In the cause of this study there were certain variable that were identified as limiting factors.

Firstly, it was identified that accounting information in decision making are dominantly done at the managerial level, it was indeed very difficult to reach out to a good number of top managers to obtain information relating to this study.

Again, the response by the respondents was very slow and reluctant at providing what is considered to be official constraints, time and distance of material also contributed to the limitation of the study. Nevertheless, the research endeavored to still conduct an acceptable study in spite of the aforementioned shortcoming.

1.9       DEFINITION OF TERMS AND ACRONYMS

Accounting: This is a system that measures business activities process that information into reports and communicate these findings to decision makers. Harris (2002).

Information: This is a means of having effects over something without force. (2002).

Decision making: This is the process of sufficiently reducing uncertainly and doubt alternative to allow a reasonable choice to be made from among them. (Harris (2002).

Manufacturing: The process of converting raw material component, or part into finished goods that meet a customers expectation or specification. (Business dictionary).

Planning: The use of information supplied by accountants and making decision by which management formulates objectives and choose a pattern of action in order to achieve those objectives for the further business of those firms. Anyaogu (2002).