COST VOLUME PROFIT ANALYSIS FOR PROFIT PLANNING IN MANUFACTURING FIRM

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ABSTRACT

This paper presents the study on the subject of the Cost value profit analysis for profit planning in manufacturing firm ( A case study Obika Industry Nigeria limited Nkpologwu Anambra state). Cost volume profit analysis is a model which is used to plan profit. The general objective of this study was to determine if CVP can assist management in formulating pricing policies by projecting the effect of different price structures on cost and profit and to highlight the usefulness of CVP analysis in manufacturing companies in Nigeria. Specifically, this study desired to understand the relevancy and efficiency of Cost Volume Profit analysis as a decisions model in helping manufacturing business to face the challenges caused by the ever changing business environment predominantly in Nigeria, as policy makers in making relevant policies.A case study survey type of research was used in which a sample from the target population was selected as a source of information needed to achieve researcher‟s objectives. Consequently, random probability sampling and non-random sampling were selected. This study included both qualitative and quantitative data. Thus, the researcher collected data by administering a questionnaire along with interviews to pave the way for easy analysis of data. Focus group discussion was also conducted for top management team and employees who are working in management accounting unit as well as production manager.

The analysis showed that, CVP analysis, though it is a very useful tool for decision making, is based upon certain assumptions which can rarely be completely realized

in practice. This leads managers and policy makers to forget about the usefulness of the model and conclude that CVP is not effective and efficient technique for decision making. In presented enterprise, CVP analysis seemed to be not well known and hence not applied for managers to find out and decide what to do to improve business and get planned values of certain indicators.

Due to competition and complexity of the structure of production, traditional management accounting techniques are not giving the fruitful result to response to the keen competition. Thus, manufacturing organizations have to adopt advanced management accounting techniques. Therefore, policy makers should pave the way for policy implanters to select the model for decision making and test the sensitivity of the model with alternative scenarios and judge which outcome best describes their beliefs about the future. To help managers make better decisions, accountants should evaluate the quality of the techniques they use, given the organizational setting and decisions to be made.

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