Table of contents
Statement of the problem
Objectives of the study
Significance of the study
Scope and Limitation of the study
Definition of terms
Overview of Cost-Volume-Profit Analysis
Break-Even Analysis A Traditional View of the
Graphical Approach to break-even Analysis
Formular method of finding break point
The multi- product cost-volume-profit analysis
Decision making function
Other tools for decision making and control
Research design and methodology
Primary sources of data
Secondary sources of data
Population and sample size determination
Method of data collection
Method of validating the instrument
Method of data analysis
Data Presentation, Analysis and Interpretation
Testing and interpretation of hypothesis
Summary of Findings, Conclusions and Recommendations
OF THE STUDY:
(2001), defined cost-volume-profit analysis as “specific way of presenting and
studying the inter-relationship between costs, volumes and profits”. According to him, it provides information to
management in a most lucid and precise manner.
It establishes a relationship between revenues and costs with respect to
volumes. It indicates the level of sales
at which costs and revenue are in equilibrium.
This equilibrium point is commonly known as Break even point. The break-even point is the point of sales
volume at which total revenues is equal to total costs. It is a point of zero profit.
to Brown et al (1997), “some industries today are encountering problems raised
by expansion through increased sales and the introduction of new products. Many on the other hand are facing problem of
contraction due to the introduction of substitute materials, products or
reduced demand for their products.
Whichever is the case, it is vitally important that management should be
in a clear position to plan for these changing levels of activity”.
from the problem of contraction and expansion, during the period of economic
depression, a business may be faced with the alternative of closing down or
selling its products at a price below the total cost. Also profit planning and control is made more
difficult by the changes in the general pattern of demand for the type of
products offered and the action of competitors.
order to solve the problem created by the above situations, profit planning,
cost control and decision making require an understanding of the
characteristics of costs and their behaviour at different operating
levels. One of the most important tools
developed by accountants to assist management in meeting these challenges is
STATEMENT OF THE PROBLEM:
study entitled “cost-volume-profit analysis as a management tool for decision
making” goes to suggest how the application of cost-volume-profit analysis has
helped managers in making decisions of the firm to ensure its growth and
challenges facing management are enormous particularly during this period of
economic depression and they are as follows:
Management is faced with the problem of how to make use
of the available scarce resources in order to achieve the objective of profit
Advanced state of competition and rivalry where only
the fittest enterprises survive.
Shortage of funds to buy the needed raw materials.
Low capacity utilization.
OBJECTIVES OF THE STUDY:
research will be focused on cost-volume-profit analysis as a management tool
for decision making (A case study of Nigerian Breweries Plc).
purpose of the study will be:
(i) To evaluate
the extent to which the use of cost-volume-profit analysis has helped in
achieving the profit maximization of Nigerian Breweries.
(ii) To identify
problems encountered in the practical application of CVP analysis and suggest
(iii) To examine
some other techniques that help in decision.
(iv) To highlight
the superiority of using cost-volume-profit over other forms of techniques.
SIGNIFICANCE OF THE STUDY:
study, “cost-volume-profit analysis as a management tool for decision making”
(A case study of Nigerian Breweries Plc) will educate the entire public on how
cost-volume-profit analysis is an effective tool applied by managers in
decision making in their firms.
study will be of immense benefit to the following groups of persons:
(a) Business organizations especially
Nigerian Breweries Plc.
(b) Cost Accountants and Financial analysts.
(c) Students of accountancy profession and
other allied profession.
(d) Institute of management and technology
(e) Researchers on related study.
(f) The general public.
1.5 RESEARCH QUESTIONS:
this study, “cost-volume-profit analysis as a management tool for decision
making” (A case study of Nigerian Breweries Plc) the following research
questions come to mind: They are:
Cost-Volume-Profit analysis used as a management tool for decision making in
Nigerian Breweries Plc?
(ii) Has the
application of the cost-volume-profit analysis helped Nigerian Breweries to be
efficient and effective in its operations?
(iii) What other
technique apart from cost-volume-profit analysis does Nigerian Breweries employ
in decision making?
(iv) Are these
other techniques superior to cost-volume-profit analysis?
(v) What problems
do Nigerian Breweries encounter in decision making?
hypothesis to attest to the questionnaire’s belief that cost-volume-profit
analysis is a management tool for decision making can be tested as follows:
analysis is extensively applied in Nigerian Breweries Plc.
analysis is not extensively applied in Nigerian Breweries Plc.
Ho: The application
of cost-volume-profit analysis has helped the decision making and growth of the
H1: The application
of cost-volume-profit analysis has not helped the decision making and growth of
SCOPE AND LIMITATION OF THE STUDY:
topic, “cost-volume-profit analysis as a management tool for decision making”
(A case study of Nigerian Breweries Plc) should have intended to cover all the
Nigerian Breweries located in different States of the Federation but the
researcher intends to limit this topic to only 9th Mile Depot, Enugu
State due to time constraints, distance and financial handicap. The study of Nigerian Breweries 9th
Mile Depot Enugu shall also serve other States of the Federation since the same
techniques are applied in other depots.
Therefore, the researcher will rely heavily on the Nigerian Breweries 9th
Mile Depot since they have adequate information data relevant to the study.
DEFINITION OF TERMS:
COST: Nweze (2000) defined cost as “a measurement in
monetary terms, of the amount of resources used for specific purpose.
According to Orjih (2000), “profit planning refers to the operating decisions
in the areas of pricing costs, volume of output and the firm’s selection of
DEPRESSION: This is a period when there
is little economic activity and many people are poor without jobs.
CONTROL: Strahlem (1977) defined cost
control as “the regulation, limitation or confinement of cost”.
MAKING: Barfied et al (1994) defined
decision making as “the process of choosing among the alternative solutions
available to a course of action or a problem situation.