The Role Of The Management Accountant In Profit Maximization (A Case Study Of Emenite Plc)

Project and Seminar Material for Accountancy / Accounting

The Role Of The Management Accountant In Profit Maximization (A Case Study Of Emenite Plc)


The management accountant is identified as one of the key officers in the accounting department of any manufacturing company. He has the duty of providing the required professional information relate to achieving the organization goal. Some of his functions include planning and controlling activities formulation of strategy decision taking optimizing the use of resources etc. In his planning function he quantifies and interpreters, the effect of planned transaction and other economic event of the organization. The management accountant by virtue of his duties participants indirectly in the management process. This research work aims to bring to the knowledge of its user the role the management accountant plays in the achievement of the goal of every manufacturing outfit which is profit minimization.

The work is organized in five chapters, chapter one is the introductory. Part which include the background of problems, significance, scope and limitation of the study. Chapter two is the literature review this is where the opinions of various author’s in related subjects are reviewed chapter three deals with the research design and methodology. This could be seems as a framework or a plan that is used in collecting analyzing the data for the study. It reveals the sources of the data the sample used and the method of investigation. In chapter four the data are being presented and analyzed the hypotheses stated were adequately tested and decision taken. Finally in the fifth chapter the finding of the research work is disclosed and recommendations and suggestions are give for the benefit of the user.

Table Of Contents

Preliminary Page(s)

  • Title Page
  • Certification
  • Approval page
  • Dedication
  • Acknowledgment
  • Abstract
  • Table of Contents

Chapter One:


  • 1.1 Background of Study
  • 1.2 Statement of problem
  • 1.3 Purpose of the study
  • 1.4 Significance of the study
  • 1.5 Statement of hypothesis
  • 1.6 Scope and study
  • 1.7 Limitation of the study
  • 1.8 Definition of terms
  • References

Chapter Two

Review of Related Literature

  • 2.1. Definition of profit maximization
  • 2.2. Function of management accountant in relation to profit maximization
  • 2.3. Ways of regulating cost in a manicuring company
  • References

Chapter Three

Research Design and Methodology

  • 3.1. Sample used
  • 3.2. Method of investigation
  • References

Chapter Four

4.0. Data Presentation and Analysis test of Hypothesis

  • References

Chapter Five

5.0. Summary of Findings, Conclusion and Recommendation

  • 5.1. Findings
  • 5.2. Conclusion
  • 5.3. Recommendation
  • Bibliography
  • Appendix
  • Questionnaire

Chapter One


1.1 Background of Study

Due to the complexities in the system of most organization the system of cost accounting is equally becoming complex and resultantly a body of professional with special expertise in this is created. This body of professional is called the management accountants and the area of study is know as management accounting.

Woody et al (1985) define management accounting as the process of identification measuring accumulating analyzing preparation in interpretation and communication of financial information used by management to plan events and control within an organization and to ensure proper use and accountability of its resources form the above definition it means that the management accountant has a range of function to carry out in organization.
According ICMA “management accounting is the presentation of accounting information is such a way as to assist management in the creation of policies and in the day-to-day operation of an undertaking”.

To achieve this aim he management accountant is interested in the past the present and the future. Useful information and be extracted form past result which together with report of current performance of point the way to immediate management action. In the same vein forecasting the future enable the management to evaluate current result more readily and may also reveal areas of business which requires corrective actions. David fanning (1983) defined management accounting as “the application of professional knowledge and skill in the preparation and presentation of accounting information in a way to assist the management in the formulation of polices and in the planning and control of operating of the undertaking it is designed to provide information for internal problem solving. The management accounting system of planning and control is designed to spur up and help chief executive search for and selecting shorting run and long run goals and implementing plans apprising performance and pinpointing deviations from plan.

To be able to do all these the management accountant must posses some knowledge of account. He must have a thorough understanding of the operation of the organization in which these system are implemented and the appropriate technology to apply in each case for the provision of management information. Information depends solely on the type of business. It is obvious that the management of a manufacturing company will need information that will enable them consider the factor affecting cost of production, cost of classification, cost reduction, product pricing market shares of the products choice of the product lines diversification and investment. However a trading company needs information that will concentrate decision on customers demands advertisement and product branding.

The management accountant uses data from the financial and cost accounting system to perform his ask he conducts special investigations and uses accounting and other appropriate techniques from statistic and operation research. He considers the human element in all activities so that at all times he will be provided with information which is relevant for carrying out his work effectively so as to maintain his value or even enhance it. In addition he interprets data and communicate same to the management.

The inability of the management accountant to perform his duties would result in shortage of in information for long and short run planning system thereby affecting the noble objective of any business organization which is profit making.

Woldi (1976) opines that profit maximization can only come about through an efficient and effective management process and Nigeria being a developing country it is clear that the cost of running a business is increasing at a very high rate. Many manufacturing companies in Nigeria has this as a problem them struggle to maintain reasonable amount of earning in a situation where costs are rising there by making profit margin more and more difficult to sustain mean while the Nigeria manufacturing companies as reported by he manufacturing association of Nigeria (MAN) in its 1997 economic review are faced with escalating costs of production arising from the adoption of macro-economic policies which are inflationary in nature. This trend reinforces the imperativeness of the application of sound management accounting technique in the manufacturing companies. Interestingly Adewumi (1989) posits that management practice is yet to have its rightful place in Nigerian manufacturing companies. The implication is that the principle of management is rarely applied in most manufacturing firms in Nigeria.

A careful study of Nigeria manufacturing companies shows as decrease in productivity this is as a result of gross incompetence and lack of motivation on the part of the top management and their subordinates consequently there has with the general planning and control of the firms resources thus profit maximization is firmly rooted in the effectiveness of the planning and control of the firms resources. generally speaking the role of a management accountant is based on his technical knowledge experience and judgement in contributing to the success of the manufacturing industry.

1.2. Statement of Problem

There has been a considerable lack of appreciation by many as to the intrinsic value of management accountants. Manufactures like other business executions have had to appreciate where such value have stimulated the development of management accounting as an information toils in business organization. Such events includes the increased competition in business and rapidly developing technology. The resultant changes that have emerged have intensified managers need for information that is continually for financial information beyond that contained in the traditional income statement and balance sheet. Over the last three decades product have become obsolete as an alarming rate. The advent of scientific breakthrough have resulted in the development many more basic components such as the transistor and electronic “chip” which have literally revolutionalized many industries and their products. Scientific researcher reports that this revolution is only the beginning.

Drastic changes have taken place in production method over the last three decades the term ‘Automation’ has crept in and today may product are produced ritually untouched by human hands. For example oil refinery operation are controlled by massive computer networks machine tools are electronically controlled and there are even some entire manufacturing plan where workman do little more than monitoring instrument panel modes of management and method of decision making have been affected by the development of new and powerful quantitative toils such as linear programming probability analysis and decision theory. These new toils which have come to be from the mathematical and statistical sciences are becoming indispensable in day-today-decision making. The problem of increase cost of production have forced the companies involved to make many adjustment which modification of product changes in the methods of production and even marketing and the discovering of new sources of financing production some company go as far as reducing the quality of raw material and up producing less quality producing which cannot help matters in the long run.

The economic impact of these and other factors have been far reacting as manger of companies are now competing and cost of production escalating these has in effect compounded the role of management accountant as an information tools over the years.

There is also the problem of poor inventory management which leads to overstocking there by tying down the company’s working capital. Another kind of problem that is facing some companies is the installation of improper plans to reduce cost of production so as to maximize profit e.g making use of low quality raw material.

1.3. Purpose of the Study

The main purpose of this study is to analyse the role of management accounting concerning profit maximization.

The specific purpose of this study are as follows;

  1. To examine the effect of cost reduction techniques for the purpose of profit maximization
  2. To examine the effect of companies fixed cost over the relevant range of output for the purpose of profit maximization

1.4 Research Question

  1. How does cost reduction techniques affects profit maximization.
  2. To what extent does company fixed cost over the relevant range of output affects profit maximization.

1.5. Statement of Hypothesis

  1. Ho: Cost reduction does not significantly affect profit maximization
    HI: Cost reduction significantly affect profit maximization
  2. Ho: The company’s fixed costs does not significantly affect profit maximization.
    HI: The company’s fixed costs significantly affect profit maximization.

1.6. Significance of the Study

The significance of this study is to bring to the notice of the management the exemplary role of management accounting and the techniques used to provide information and also how these would affect the operations and the attainment of the organizational goal if these information provided are not recommended for use by the management with such knowledge and information put to use management would be able to plan control the organization such that the cost of operating the business will be at a minimum while profit will be enjoyed at the end.

1.6. Scope of the Study

This study revolves around Emenite Nigeria Plc a manufacturing company

1.7. Limitation of the Study

Some limitations were encountered by the researcher in the process of preparing this work, an example was the time available to carry out the research was short and insufficient besides, the researcher had other courses in the school curriculum to contend with so as to present a good result also The researcher had difficulties in finding related literature on this topic which would have assisted him in presenting a comprehensive work also, the research lacked finance with which to administer the questionnaires and facilitate follow up visits and some other requirements and finally, the researcher sometimes lacked cooperation from the company executives who often time complained of sufficiency of time for proper attention.

1.8. Definition of Terms

a. Profit Maximization:

Making great profit out of the little resources available.

b. Role:

A part, which a person plays in real life.

c. Firm:

A business concern or a company.

d. Management accountant:

This is a person who is responsible for keeping account that is keeping records of amount spent and that received and also providing management information.

e. Journal:

A newspaper or magazine that deals with a particular subject or profession.

f. Linear programming:

This is a mathematical technique concerned with the allocation of scarce resources. it optimize the value of some objectives.

Chapter Five

5.0 Summary of Finding, Conclusions and Recommendations

5.1. Summary of Finding

The manufacturing company is normally referred to as the industries sector. The is mainly because of the contributions it makes towards the gross national product (GDP) of the nation the government after pays particular attention to this sector by way of provision of grants and subsides as a sources of encouragement.

Since information can provided only when there are function type performed in an organization the types of information need at any point in time is directly proportional to the function to be performed at that time hence it is pertinent to know the function of the management accountant in a manufacturing company whose information is provide for the maximization of profit. In analysis the activities of the management accountant is identified as one of the key officers of accounting department. There are certain function he performs to be able to make available he required information.

The management accountant perform the function of providing information for planning accounting decision making and evaluation of the company’s operation. In his planning responsibility he quantities and interpreters the effects of planned transaction and other economic events of the organization. He also ensure the accountability of resources of the company. He participates indirectly in the management process by virtue of his duties manufacturing companies face problems such as cost classification cost reduction and these problems emanate during production planning other problem like those associated with product pricing are caused by the disposed off at a reasonable price and at the right time to avoid over stocking and at inventory such that the company will have enough to sustain production and at the same time maximize profit.

The company’s management wants these problems to be know because of the allocation of appropriate cost of production in order to reduce cost and increase productivities and efficiency. They therefore need information to solve this problems.

Also in order to allocate production cost appropriate the management accountant gets involved in the classification of cost to provide information for profit planning and profit maximization these costs are therefore classified into fixed variable and semi-various costs. Semi-variable costs are later separated into its components for further classification. The management accountants performs this task just because he is skillful in the art of accumulating analyzing verifying and interpreting of the cost data and those from other sources there are contain management accounting techniques that he employs of which the standard costing technique and the budgeting technique are the most popular. The management accountant specifically uses the budgeting technique to provide certain relevant information for profit planning. From the prepared budgeting the management accountant observes the company’s financial situation in terms of cash inflow and outlaw.

With these technique the management accountant provide the information for the control of the company’s operations. It can also be observed from the budget whether the actual result of production are greater or less then what has been budgeted. If there exists such discrepancy control is established on the area that caused the adverse effect. Cash budget are pertinent to manufacturing companies since it shows at any point in time the financial standard of the company. This therefore negate what happen in the profit and loss account of the company which indicates a net profit at the time of favourable condition and not loss at unfavourable conditions. The cash budget gives indications of other danger or unhealthy conditions, since company can carry out operation without cash. With such budget as revealed by it study manufacturing companies are able to give information with which to conduct feasibility studies as to the variability of its plan to achieve the profit maximization goal.

Another technique used by the management accountant is the standard costing technique for the operation of the company. For example he oversees the standard of material input. Labour and overhead. This costing system fosters a compares of actual and standard cost and where there appears a variance the management accountant investigates the course. It is one thing the account analyze and interpreter data in order to satisfy the need of managerial information for purpose of profit planning activities of the company and another thing to put down this information in an understandable manner. That is the way the content of the repent will be constructed by all level of management so that all information contained there will be useful.

The structure and preparation of the report is so important such that the management could implement. The management accountant has to prepare a report with qualities ranging from relevance time lines accuracy understand ability and aggregation. Where one of the qualities is lacking the report become meaningless.

Furthermore if a report is urgently need to solve a problem and the report is not available as at the time it is needed of what value is such a report? It eventually become useless to the management of company.

In the preparation of report certain factors are to be considered. Those are the recipients of knowledge of technical terms numeric liter racy level of he user and the characteristic group of people working with the management accountant. All these are fully looked into to provide room for adequacy under the structure and preparation of the report. If the report is not properly done the management would be hindered form getting the appropriate information it needs.

On the strength of the findings and analysis of data there is revelation that accountants have a lot to play in managing the affairs of the manufacturing company. From the questions asked the researcher believes that management accountant are concerned about meeting the top management level to exploit their service.

5.2 Conclusions

This research work took off on the premise of the role the management accountant plays in the optimization of profit of manufacturing firm. The study revealed that the top management of Emenite Ltd a manufacturing company based in Enugu cannot plan and control their day-to day operational activities efficient without the very relevant information from the management accountant concerning the problems confronting them.

The researcher can confidently and conveniently conclude that the management accountant through the provision of specialized information gained from his knowledge as a professional plays a prominent role in the maximization of the profit of manufacturing outfits.

5.3 Recommendations

The following useful suggestions are proffered form the above findings.

  1. Since business decision today guarantee the continuous existence of the business and the effectiveness of the decision itself is a function of the information used in reaching it we recommend therefore that every manufacturing outfit should employ the services o a quantified management accountant.
  2. The management accountant should be provided with some other qualified assistants to ensure at all times an uninterrupted and control. Such assistants should equally posses a sound knowledge of accounting.
  3. Although the management accountant is a middle level manager he should be allowed to interpret the report he prepared to the management especially the technical terms. The management on their part should be able to follow the report to the later so as to get the most it can afford.
  4. Information can only be useful if it is both relevant and timely manually general information may be cheap but may not be timely therefore recommends a computer based information system to quicken the pace of work analysis as data error and undue delay in decision making will definitely hinder the firms goal of profit maximization.
  5. The world is a dynamic plan of experience. While this is true of all knowledge therefore recommended here that the management of the company should give adequate exposure to their management accountant as regards training programmes as well as appraisal and evaluation seminars in order to acquaint them with modem discoveries and make them keep pace with new knowledge.
  6. I suggest that further research should be done on his topic. The entrepreneurs of manufacturing companies should be interviewed so that the problems experience by them relating to accounting and management can be looked into from their own angle.

The Role Of The Management Accountant In Profit Maximization (A Case Study Of Emenite Plc)

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