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CHAPTER
ONEINTROD
UCTION1.1
BACKGROUN
D OF THE
STUDY
Following the
uncertainties
prevailing in
the Nigerian
business
environment
today,
managers
andstakeholde
rs must be
poised and
prepared to
compete
favorably
under these
rapidly
shiftingconditi
ons. In order to
survive under
these
environmental
complexities
and
vagueness,
managersand
stakeholders
of the
manufacturing
sector need
sharp tools,
proven
management
techniques
toforecast the
major changes
which are
likely to affect
the business
while they
choose
futuredirection
and dimension
of resources
needed to
attain selected
goals.Budgetar
y control as
proven
management
tool (Chandler,
1990) helps
organization
management,a
nd enhances
improved
performance
of any
economy in
different ways.
Its primary
function is
toserve as a
guide in
financial
planning
operations; it
also
establishes
limits for
departmentale
xcesses. It
helps
administrative
officials to
make careful
analysis of all
existing
operations,the
reby justifying
expanding,
eliminating or
restricting
present
practice.
(Musselman
and
Hughes1981).
Budgeting and
control entails
a distinct
pattern of
decisions in an
organization
which is
capableof
determining its
objectives,
purposes or
goals, and how
these goals
are achieved
byestablishing
principal
policies and
plans.
However, the
inability to
recognize the
problemconcer
ned and fixing
a boundary off
investigation
creates an
obstacle for
the
successfulimpl
ementation of
budgeting and
control. Some
organizations
only look for
narrow ranges
of alternatives
which they
arrive at from
their past
expenses and
present
situation,
other manage
ment levels
even avoid
long-term
planning and
budgeting in
favor of
today¶s
problemsthere
by making the
problems of
tomorrow
more severe
(Steward
1993). The
foregoing
reflects

on the need
for
organizations
to set up a
formal
mechanism for
scanning its
environment
for opportuniti
es and give
early signs of
future
problems, this
course of
action will
improve
thesystem of
budgeting and
control,
resulting in an
expectation of
improved
performance,
in thefood and
beverage
sector. This
project is
carried out in
order to
evaluate the
relevance
of budgeting
and budgetary
control to
manufacturing
companies in
Nigeria, and
whether or
notbudgetary
control will
improve
organizational
performance,
positively.
1.2
STATEMENT
OF PROBLEM
A good
number of
organizations
do not prepare
budgets, and
even when
they do, it is as
anannual
routine, not as
a statement of
concrete plan
and the
consequence
has been poor
or non-
implementatio
n which
translates to
low
profitability,
and poor
performance.
This trend can
beattributed to
either
inadequate
literature on
budgeting and
budgetary
control
matters or
deliberateatte
mpt of
management
to circumvent
plans for their
ulterior
motives. These
deficiencies
(inmanagemen
t) can be
addressed
through the
budgetary
control
techniques.
Most
companies
donot realize
the effect of
budgets and
budgetary
control in the
performance
of their
company.
Thisresearch
has been
embarked on
to correct the
deficiencies,
and show the
importance of
budgetsand
budgetary
control, on
performance.
1.3
OBJECTIVES
OF THE
STUDY
The main
objective of
this study is to
establish a
significant
positive
relationship
between
theprocess of
budgeting, and
performance in
the selected
food and
beverage
companies.
Other objectiv
es are;

1.
To examine
how budgeting
fits into the
overall
framework of
decision
making,
planning,and
control.2.
To establish
budgeting as
an effective
tool for
planning and
control3.
To broaden
knowledge of
managers of
selected food
and beverage
companies
thatbudgeting
and budgetary
control makes
for
profitability.4.

To reveal the
effect of
budgeting on
overall
organization
performance
of selected
foodand
beverage
companies.5.

To establish
the
relationship
between
budgeting and
potential
growth in the
selectedcompa
nies.
1.4
RESEARCH
QUESTIONS
The following
research
questions are
pertinent to
this study;

1.
Has budgeting
been an
effective tool
for planning
and control in
the selected
companies?2.
Does
budgeting aid
effective
decision
making?3.

Is there a
significant
relationship
between
budgeting
process and
organizational
performance?
4.

Has the
budget system
being
maintained led
to increased
profitability?5.

Will the
process of
budgeting and
budgetary
control
increase
potential
growth in
selectedcompa
nies?
1.5
RESEARCH
HYPOTHESIS
Therefore, the
following
hypothesis has
to be tested,
so as to ensure
the successful
achievementa
nd accuracy of
the study.

Hypothesis 1:
H
0
: There is no
significant
positive
relationship
between
budgeting and
potential
growth
throughperfor
mance of the
selected Food
and Beverages
companies
considered in
the study.H
1
: There is
significant
positive
relationship
between
budgeting and
potential
growth
throughperfor
mance of the
selected Food
and Beverages
companies
considered in
the study.
Hypothesis 2:
H
0
: Budgeting is
not an
effective tool
of planning
and control in
an
organization.H
1
: Budgeting is
an effective
tool of
planning and
control in an
organization.
Hypothesis 3:
H
0
: Budgeting
system in
selected
companies has
not led to
increased
profitability.H
1
: Budgeting
system in
selected
companies has
led to
increased
profitability.
1.6
SIGNIFICANC
E OF STUDY
The outcome
of this
research will
aid the better
understanding
of the need for
budgeting
andbudgetary
control as well
as how it aids
improved
performance,
through
effective
managementd
ecision
making, that
translates to
profitability.
This study will
serve as a plus
to
existingliteratu
re. It will
enlighten
managers of
selected
companies as
to the
usefulness of
budgeting
andbudgetary
control. It will
also serve as a
reference for
further
research
concerning
this topic.

The need for

this study
cannot be over
emphasized in
the wake of
uncertainties
prevalence in
theNigerian
business
environment.
It is pertinent
for managers
to pay serious
attention to
budgetsand
budgeting
control. The
process of
budgeting like
any
management
process,
involvesprincip
ally, planning
and control.
Beneficiaries
of this study
include;1.

ManagersThis
study is set to
add to the
understanding
of various
management
levels to give
proper knowle
dge of budgets
and its effect
on profitability.
The end result
of this, among
others;A.

Provide
information
that would be
vital in
management
planning and
decision.B.

Provide ideas
to managers of
selected
companies as
to the
usefulness of
budgeting
andbudgetary
control.2.

Manufacturing
companiesThe
y would
benefit the
most from this
research
because it
would help
them
understandand
appreciate the
value of
budgets in
improving
organizational
performance.3
.

Investors And
Other
PartiesBefore
any investor
can be
influenced to
invest in an
organization,
he/ she has to
consider the
performance
of the
organization.
This
information
would inform
investors
of budgeting
techniques
employed by
manufacturing
organizations,
noting that
companieswho
do not
implement
them are
heading for
failure, and are
therefore not
soundinvestme
nts.4.
GovernmentTh
e better the
performance
of companies
that translates
to profitable
companies, it
results
toincreased
earnings from
taxes and
levies by
government.Ot
her
beneficiaries
are;
1.

The Society At
Large,2.

Fellow
Researchers.
1.7 SCOPE
AND
LIMITATIONS
OF STUDY
1.7.1 SCOPE OF
STUDY
In order break
the barrier of
some
limitations, the
scope of study
would be
applicable.

A.
Population of
study
Based on this
research, the
population
studied would
consist of all
food and
beveragemanu
facturing
companies
listed on the
Nigerian Stock
Exchange,
under the
NigeriaManufa
cturing
Industry.B.
Sample Size
:For
practicability
purpose, the
researcher will
be focusing on
four selected
organizations
thatwould be
of great
assistance in
the progress of
this research.
In order, to
make a
validconclusio
n on the
research work;
these
companies
have been
selected using
judgmentalsa
mpling
technique. The
organizations
selected for
this purpose
are;1.

7
-up bottling
company2.
Nestle Nigeria
plc3.

Flour mills
Nigeria plc4.
Nigeria
bottling
company plc
C.

Geographical
Coverage
This research
will be carried
out in Lagos
state, Nigeria.
This is because
the
selectedcompa
nies are
located herein,
and also, the
familiarity of
the terrain.
D.

Time Horizon

This project
will be carried
out for a brief
period of less
than a year.
Data that
would be
usedfor this
research work
will be
obtained from
October 2010
to April 2011.
1.7.2
LIMITATIONS
OF STUDY
The limitations
of this
research
include some
factors that
limit the
generalization
of thefindings.
They
include;1.

Difficulty in
obtaining
accurate data
as sourced
from
questionnaires
, due to
thesensitivity
of the topic
toward the
survival of any
organization2.

This study is
concerned
with
evaluating the
effect of
budgets and
budgetary
controlon the
organization.
The
geographical
coverage
tends to be a
limitation since
thestudy is
only
considering
Lagos state.3.

Inadequate
time to carry
out the
research.
Because of the
nature of this
research,
inmeasuring
performance
indicators,
time appears
to be a
constraint.4.
Location of the
researcher:
the researcher
is a student of
Covenant
University,
andbecause of
the rules of
residency that
is binding on
the
researcher, it
is not easy to
goout of
school easily
to obtain
information for
the research.
1.8
SUMMARY
TO
RESEARCH
METHODOLO
GY
The method of
analysis for
this study is
the use of
simple
correlation
analytical
techniquespeci
fically the
Pearson
Product
Movement
Correlation co-
efficient which
is computed
toestablish a
relationship
between
budgets and
budgetary
control and
potential
performance
of thefive
selected food
and beverage
companies in
Nigeria. We
shall make use
of secondary
dataprecisely
financial
statement, of
these
companies,
textbooks
among others
using turnover
as the
budget
variable and
earnings per
share (EPS),
dividends per
share (DPS),
Net Asset per
share(NAS) as
performance
indicators,
since they are
all potential
and growth
ratios.
1.9 SOURCES
OF DATA
Data that
would be used
for this
research will
be secondary
data.Secondar
y sources are
already
analyzed data
bringing about
information
and thus the
researcher doe
s not have to
generate this
data himself
from the field.
They include
financial
statements,
TheNigerian
Stock
Exchange fact
book,
magazines,
journals, text
books,
company¶s
budgetspublis
hed
documents as
well as the
past projects
of other
students.
1.10
DEFINITION
OF TERMS
1.

BUDGET:
it is a financial
plan for
implementing
the various
decisions that
management
hasmade
expressed in
terms of cash
outflows and
inflows.

2.

BUDGETARY
CONTROL:
it is a control
tool used to
monitor and
enforce
compliance
withbudgets.

3.

BUDGETING:
it is concerned
with the
implementation
of long term
plan for the year
ahead.

4.
DECISION
MAKING
: it is a
management
function of
planning,
organizing, and
using
theavailable
alternatives to
make
decisions.5.

LONG TERM
PLAN
: a long term
plan is a
statement of the
preliminary
targets and
activitiesrequire
d by an
organization to
achieve its
strategic plans
together with a
broad estimate
for eachyear of
the resources
required.6.

MANUFACTURIN
G COMPANIES
: they are
organizations
that are
involved with
producingfrom
raw materials
into either semi-
finished or
finished goods.
7
.
FINANCIAL PLAN
: this is a plan
that is set or laid
out in financial
terms.8.

GOAL
CONGRUENCE
: When the
organization¶s
overall goals
and the
individual
manager¶sgoals
coincide.9.
ACTUAL
PERFORMANCE
: this is the
period
performance for
the
organization.
REFERENCES
Anthony A.A,
S.K Robert &
Co. (200
7
)
Management
Accounting
, Prentice
International
Edition.Colin
Drury (2004).
Management
and Cost
Accounting
,6
th
Edition,
BookPower
Publishers.Issu
e 12 (2008).
European
Journal of
Economics,
Finance and
Administrative
Sciences.
Langfield Smit,
Thorne, Hilton
[2003]
Management
Accounting: An
Australian
Perspective
.McGraw-Hill
Australia.Luce
y.T (1984)
Costing: An
Instruction
Manual
. English
Language
Book Society/
OPPublications
Great Britain,
2nd
Edition.Akinsuli
re, C. O.
(2010).
Financial
Management.
Ceemol
Nigeria
Limited, 6
th
Edition.
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