EFFECTS OF MANAGERIAL ACCOUNTING PRACTICES ON

FINANCIAL PERFORMANCE: A CASE OF MANUFACTURING

FIRMS IN INDUSTRIAL AREA, NAIROBI

BY

CONSOLATA WAIHENYA

UNITED STATES INTERNATIONAL UNIVERSITY - AFRICA

SPRING 2019

i

EFFECTS OF MANAGERIAL ACCOUNTING PRACTICES ON

FINANCIAL PERFORMANCE: A CASE OF MANUFACTURING

FIRMS IN INDUSTRIAL AREA, NAIROBI

BY

CONSOLATA WAIHENYA

A Research Project Report Submitted to the Chandaria School of Business in Partial

Fulfillment of the Requirement of the Degree of Masters in Business Administration

(MBA)

UNITED STATES INTERNATIONAL UNIVERSITY - AFRICA

SPRING 2019

ii

STUDENT’S DECLARATION

I, the undersigned declare that this is my original work and has not been submitted to any

other college, institutions or university other than the United States International

University - Africa in Nairobi for academic purposes.

Signed: __________________________________ Date: ___________________

Consolata Waihenya (ID No: 643136)

This research project report has been presented for examination with my approval as

appointed supervisor.

Signed: __________________________________ Date: ___________________

Prof. Amos Njuguna

Signed: __________________________________ Date: ___________________

Dean, Chandaria School of Business

iii

COPYRIGHT

Copyright © Consolata Waihenya, 2018

All Rights Reserved.

No part of this project may be reproduced, translated or reprinted or redistributed in any

form or by any means or stored in a database or retrieval system, either in part or whole

including photocopying without prior written permission of the author except for

quotations in critical reviews or articles.

iv

ABSTRACT

The purpose of this study was to investigate the effects of managerial accounting

practices on financial performance of manufacturing firms with a special focus on

manufacturing firms in industrial Area Nairobi, Kenya. The research questions in the

study were: What are the effects of activity-based costing on the financial performance of

manufacturing firms in Industrial Area Nairobi? How do budgeting practices affect the

financial performance of manufacturing firms in Industrial Area Nairobi? What are the

effects of cost-volume profit analysis on the financial performance of manufacturing

firms in Industrial Area Nairobi?

The research design employed in this study was descriptive in nature. For the purpose of

this study, the target population consisted of 183 firms where the top, middle or low level

management staffs were involved. The simple random sampling was representative of the

population and offers an unbiased selection which was important in drawing conclusions

from the results of the study. The sample captured 30% of the manufacturing firms in the

sampling frame. The research issued a total of 54 questionnaires, out of which 42 were

filled and returned, thus giving a response rate of 78%. Primary data collection was via a

questionnaire as this was an efficient and convenient way of gathering the data within the

resources and time constraints.

The study established that the company adopted activity based costing as a management

accounting practice. It was also established that activity based costing affected financial

performance. Most of the company has better insight for benchmarking and budgeting

with ABC system. It was also established that ABC helps to identify inefficient products

(value destroying), departments and activities and helps to allocate more resources on

profitable products. The findings show that a comprehensive activity based costing

system of support services exists, and is characterized by a high degree of integration

among departments. It was revealed that budget participation affected financial

performance. It was also revealed that long term and short term budget plans have an

influence on financial performance. The findings established that to a great extent sales

volume affected financial performance. At the same time analysis of the impact of fixed

cost on the other hand revealed that mixed costs affected financial performance.

v

It was concluded that most firms in the manufacturing sector have adopted the use of

activity based costing, standard costing, life cycle costing and target costing. The findings

also show that ABC helps to identify inefficient products (value destroying), departments

and activities and helps to allocate more resources on profitable products. In addition,

there is a high rate of centralization and coordination. Most manufacturing firms have

adopted budgeting practices as a management accounting practice and budget

participation, budget process, budget planning also affect financial performance. Despite

this, reporting of deviations from budget targets are rarely reported, although the adoption

of financial modeling in the budgetary process has enhanced accuracy of the budget plan.

Utilization of CVP helps managers in understanding the relationship between the selling

price, amount sold, cost of product and finally the profit. At the same time, most Firms

use Cost Volume Profit Analysis in planning and decision making in the company.

It was recommended that there is a need to create awareness on the impact of activity

based costing on financial performance of manufacturing firms in industrial Area Nairobi.

The institutions also need to put up clearly specified goals and objectives in order for

activity based costing in to be effective in the company. Manufacturing firms should

ensure there is ample budget participation and budget control in order to have control

over the financial performance. Budget planning should also be key to the agenda. The

budgets should also have clear goals and objectives of what the firms intend to achieve,

and this is made possible when stakeholders to the budget are involved. Cost Volume

Profit Analysis is vital in planning and decision making in the company and therefore all

manufacturing firms should utilize the process.

For further analysis, similar research needs to be done in manufacturing firms in

alternative counties so are to have a generalization of the findings. In addition, more

research should be carried out that also includes those companies in other sectors to

establish if they also consider the management accounting practices as important and to

establish the frequency rate of usage of the practices. Further research is important in

other countries with similar or almost same micro and macroeconomic environments for

manufacturing companies. The findings of which would facilitate a cross-country

comparison of the management accounting practices and their impact on financial

performance.

vi

ACKNOWLEDGEMENT

My profound gratitude goes to the Almighty God for granting me the gift of life, good

health and resilience during my period of study and most importantly making it a success.

I wish to express my deep appreciation to my supervisor, Prof. Amos Njuguna for his

relentless support, advise, constructive criticism and guidance through my course of

study.

I will remain forever grateful for the support of my family, friends and colleagues at work

for the encouragement and prayers throughout my study period.

vii

DEDICATION

This research proposal is dedicated to my parents who taught me the values of life,

knowledge, respect, integrity and hard work. Most importantly, they made me learn that

life will never be straight line, we have to work hard every day and strive to remain

positive in all circumstances and that when I fall, I should not remain down but wipe off

the dust and soldier on.

To my mother who taught me that the best kind of knowledge to have is that which is

learned for its own sake and that even the largest task can be accomplished if it is done

one step at a time. Without you, I would not be who I am today. Thank you for undying

support, your inspiration is greatly treasured.

To my lovely daughters Solange and Sonita, thank you for coping with undue paternal

deprivation during my course of study.

I dedicate this work to my family, my colleagues, friends, classmates and students in the

field of business administration and finance. May the Almighty God continue to bless you

all abundantly.

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TABLE OF CONTENTS

STUDENT’S DECLARATION ........................................................................................ ii

COPYRIGHT ....................................................................................................................iii

ABSTRACT ....................................................................................................................... iv

ACKNOWLEDGEMENT ................................................................................................ vi

DEDICATION.................................................................................................................. vii

LIST OF TABLES ............................................................................................................. x

LIST OF FIGURES ......................................................................................................... xii

LIST OF ABBREVIATIONS ........................................................................................xiii

CHAPTER ONE ................................................................................................................ 1

1.0 INTRODUCTION........................................................................................................ 1

1.1 Background of Study ..................................................................................................... 1

1.2 Statement of the Problem ............................................................................................... 4

1.3 Purpose of the Study ...................................................................................................... 5

1.4 Research Questions ........................................................................................................ 5

1.5 Importance of the Study ................................................................................................. 6

1.6 Scope of the Study ......................................................................................................... 7

1.7 Definition of Terms........................................................................................................ 7

1.8 Chapter Summary .......................................................................................................... 9

CHAPTER TWO ............................................................................................................. 10

2.0 LITERATURE REVIEW ......................................................................................... 10

2.1 Introduction .................................................................................................................. 10

2.2 Effect of Activity based Costing on Financial Performance ....................................... 10

2.3 Effect of Budgeting Practices on Financial Performance ............................................ 15

2.4 Effect of Cost Volume Profit Analysis on Financial Performance .............................. 20

2.5 Chapter Summary ........................................................................................................ 25

CHAPTER THREE ......................................................................................................... 26

3.0 RESEARCH METHODOLOGY ............................................................................. 26

3.1 Introduction .................................................................................................................. 26

3.2 Research Design........................................................................................................... 26

ix

3.3 Populations and Sampling Design ............................................................................... 27

3.4 Data Collection Methods ............................................................................................. 29

3.5 Research Procedures .................................................................................................... 30

3.6 Data Analysis Methods ................................................................................................ 31

3.7 Chapter Summary ........................................................................................................ 32

CHAPTER FOUR ............................................................................................................ 33

4.0 RESULTS AND FINDINGS ..................................................................................... 33

4.1 Introduction .................................................................................................................. 33

4.2 Response Rate and Demographical Factors ................................................................. 33

4.3 Activity Based Costing and Financial Performance .................................................... 35

4.4 Budgeting Practices and Financial Performance ......................................................... 39

4.5 Cost Volume Profit Analysis and Financial Performance ........................................... 46

4.6 Management Accounting Practices and Financial Performance ................................. 49

4.7 Inferential Analysis ...................................................................................................... 52

4.8 Chapter Summary ........................................................................................................ 52

CHAPTER FIVE ............................................................................................................. 53

5.0 DISCUSSION CONCLUSION AND RECOMMENDATION .............................. 53

5.1 Introduction .................................................................................................................. 53

5.2 Summary of Findings ................................................................................................... 53

5.3 Discussion .................................................................................................................... 56

5.4 Conclusion ................................................................................................................... 62

5.5 Recommendation ......................................................................................................... 63

REFERENCES ................................................................................................................. 65

APPENDICES .................................................................................................................. 73

APPENDIX I: RESEARCH QUESTIONNAIRE ............................................................. 73

APPENDIX II: QUESTIONNAIRE .................................................................................. 74

APPENDIX II: LIST OF MANUFACTURING FIRMS .................................................. 80

x

LIST OF TABLES

Table 4.1: Response Rate ................................................................................................... 33

Table 4.2: Activity Based Costing Adoption ..................................................................... 36

Table 4.3: Activity Based Costing Adoption on Financial Performance........................... 36

Table 4.4: Reasons for Adopting ABC Costing................................................................. 37

Table 4.5: Innovative Techniques and Financial Performance .......................................... 37

Table 4.6: Life Cycle Costing and Costs Incurred through Products Life......................... 38

Table 4.7: Target Costing on Product’s Life Cycle Cost ................................................... 38

Table 4.8: ABC and Identifying Inefficiencies .................................................................. 39

Table 4.9: Budgeting Practices as Management Accounting Practices ............................. 39

Table 4.10: Budgets and Allocation of Scarce Resources ................................................. 40

Table 4.11: Budgets and Interdepartmental Communication ............................................ 40

Table 4.12: Senior Management and Budget Authorization ............................................. 41

Table 4.13: Participatory Budget and Financial Performance ........................................... 41

Table 4.14: Budgets and Competitive Advantage ............................................................. 42

Table 4.15: Budget Process and Operation Assessment .................................................... 42

Table 4.16: Budgeting Process and Forecasting ................................................................ 43

Table 4.17: Budgeting and Revenue Cost Control ............................................................ 43

Table 4.18: Budgeting and Control of Financial Health .................................................... 44

Table 4.19: Cost Behavior Patterns and Revenue Projection ............................................ 44

Table 4.20: Budgeting and Control Systems ..................................................................... 45

Table 4.21: Budgets and Managers’ Responsibility .......................................................... 45

Table 4.22: Cost Volume Profit Analysis Adoption .......................................................... 46

Table 4.23: CVP and Sales, Cost and Profit Interrelationship ........................................... 46

Table 4.24: CVP Analysis and Decision Making .............................................................. 47

Table 4.25: CVP Analysis and Companies Profit .............................................................. 47

Table 4.26: Fixed Costs and Output .................................................................................. 48

Table 4.27: Mixed Cost Analysis and Decision Making ................................................... 48

Table 4.28: Management Accounting Practices and Financial Performance .................... 49

Table 4.29: Management Accounting Practices and Profits .............................................. 49

Table 4.30: Management Accounting Practices and Net Income ...................................... 50

Table 4.31: Management Accounting Practices and Sales ................................................ 50

Table 4.32: Management Accounting Practices and Total Assets ..................................... 51

xi

Table 4.33: Management Accounting Practices and Current Assets ................................. 51

Table 4.34: Correlation Analysis ....................................................................................... 52

xii

LIST OF FIGURES

Figure 4.1: Respondents Gender ........................................................................................ 33

Figure 4.2: Respondents Age ............................................................................................. 34

Figure 4.3: Work Experience ............................................................................................. 34

Figure 4.4: Highest Level of Education ............................................................................. 35

xiii

LIST OF ABBREVIATIONS

ABC Activity-Based Costing

CVP Cost Volume Profit

GDP Gross Domestic Product

ISI Import Substitution Industrialization

KAM Kenya Association of Manufacturers

SPSS Statistical Package for Social Sciences

1

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of Study

Managerial accounting is distinguished to be a very valuable accounting resource that

extensively helps organizations incorporate cost accounting data, financial and non-

financial information. According to Ballada (2012) managerial accounting deals with

provision of information to managers, those who are inside the organization and mostly

direct and control the operations of the organization. Hilton and Platt (2011) stated that

managerial accounting is the process of identifying, measuring, analyzing, interpreting

and communicating information in pursuit of organization’s goals. Management

accounting is integral part of management process. Atkinson, Kaplan, Matsumara, and

Young (2012) defined management accounting as the process of supplying the managers

and employees in an organization with relevant information, both financial (cost of

producing a product, the cost of delivering a service and the cost of performing an activity

or business process) and nonfinancial (measures related to customer satisfaction and

loyalty, process quality and timeliness, innovation and employee motivation) for making

decision, allocating resources, and monitoring, evaluating and rewarding performance.

Hilton and Platt (2011) also stated that managerial accountants are important strategic

partners in an organization’s domestic and international management teams. Horngren et

al. (2013) explained that management accounting helps managers to measure, analyze and

report financial and nonfinancial information in making decisions to fulfill the goals of an

organization. Garrison, Noreen and Brewer (2011) placed an emphasis as to what extent

management accounting information can help managers to perform their functions. This

include assisting firms in decision making, planning for the future, controlling and

problem-solving. Nandan (2010) argued that both large and small firms require adequate

and sophisticated management accounting techniques and systems to better manage

scarce resources and enhance the firm’s values. This led to an increasing shift in focus

from traditional to modern management accounting techniques in order to fulfill this

emerging need for management accounting as an aid to strategic decisions-making.

Wiweru, Hoque and Uliana (2005) stated that there are several evidences on the changes

of management accounting practices in developed countries. Wiweru et al. (2005) have

2

reported that in Canada 31% management accounting system have changed in the

previous three years. Abdel-Kader and Luther (2006) found that despite the limitations of

conventional budgets, they remained a central pillar for management accounting and were

used for planning and for controlling costs of the companies by between 84% and 73%. In

Nigeria, Abogun and Fagbemi (2011) elicited the perceptions of 110 representatives of

manufacturing companies on the relevance and desirability of budgets. The researchers

found that 68% of the companies perceived budgets to be useful tools for planning,

controlling, decision-making, coordinating, communicating and creating value. In

addition, 65% of the companies perceived budgeting as a worthwhile exercise that was

beneficial to them. In Kenya, Ndwiga (2011) investigated the role of management

accounting in creating and sustaining a competitive advantage in a Kenyan Bank where

85% of the respondents indicated that management accounting practices were very

important in creating a competitive advantage, 10% indicated that the practices were

somewhat important, while 5% were not sure.

The manufacturing industry contributes a large share of the industrial sector in developed

countries. According to Emily, Thomas and Roger (2016), U.S. manufacturing accounts

for 35 percent of value added in all of the world’s high technology production, and enjoys

a trade surplus in revenues through royalties from production processes and technology.

In addition, fifty-seven percent of all U.S. exports are in manufactured goods. Anton,

Fabiana, Mark, Tibor and Ken (2016) indicated that manufacturing output contributed

£162 billion (10%) of the total UK economy in year 2016. In addition, manufacturing

employed 2.4 million people, 8% of the total employment in 2016. Manufacturing sector

is one of the key growth drivers in Africa. According to de Vries, Timmer and de Vries

(2015) shortly after independence, employment in manufacturing progressed quickly in

Africa, from 4.7% in 1960 to 7.8% in 1975 and currently value-added in manufacturing

increased from 9.3 to 12.1 percent and the corresponding employment share from 4.8 to

7.2 percent. According to World Bank (2016), manufacturing accounts for 14% of GDP

in Kenya.

Manufacturing sector in Kenya is the fourth biggest sector after agriculture, transport and

communications and whole sale and retail trade. Manufacturing in Kenya is quite large, it

serves both the local market and exports to the East African region where and it is

3

dominated by subsidiaries of multi-national corporations. Manufacturing sector in Kenya

was initially developed under the import substitution industrialization policy (ISI) where

there was need to develop local manufacturing capacity by blocking manufacturing

import from abroad. Currently, the sector is now export based which is in line with the

country’s policy of emerging as a mid-sized economy in the year 2030. According to

Kenya Association of Manufacturers (KAM, 2015), manufacturing sector is classified

into twelve sub sectors based on the raw materials imported and products manufactured

by a given company. The sub sectors include; Building, Mining and construction,

chemical and allied, Energy, electrical and Electronics, Food and Beverages, Leather and

footwear, Metal and Allied, Paper and board, Pharmaceuticals and Medical equipment,

Plastic and Rubber, Textile and Apparel, Timber, wood and furniture, Fresh Produce.

The role of Manufacturing Sector in assisting the Kenyan Government to achieve its

Vision 2030 is mainly to create employment and wealth and increase its contribution to

the GDP by at least 10% per annum. In order for Kenya to become globally competitive

and prosperous, the objectives to be pursued according to Vision 2030 include: to

increase generation and utilization of Research and development results, to develop niche

products for new and existing markets, to strengthen the capacity and local content of

manufactured goods locally and to raise the share of products in the regional market from

7% to 15 % (KAM, 2015). Specific goals and targets identified to assist in achieving

these objectives include; development of Industrials and Technology parks, industrial

manufacturing clusters and small and medium enterprise, development of Steel and Iron

industry through establishing Integrated Steel Mill, Skill development for Technical

Human Resource in manufacturing sector, upgrading products from small and Medium

enterprises, commercialization of research and development results and attracting

strategic investors in strategic sectors like manufacture of spare parts and motor vehicle

assembly, agro processing and iron and steel industries (Mbogo, 2011).

Manufacturing firms’ range of products cut across the socio-economic range. In the

pursuit of improved performance manufacturing firms are turning towards managerial

accounting practices. These manufacturing firms employ management accounting

practices to plan, direct and control operational costs in order to enhance profitability. It is

for this reason that the current study seeks to investigate the effects of managerial

4

accounting practices on the financial performance of manufacturing firms in industrial

Area Nairobi as they present a good case of manufacturing companies in Kenya. This

study sought to investigate the effects of managerial accounting practices on financial

performance of manufacturing firms with a focus on manufacturing firms in Industrial

Area Nairobi, Kenya.

1.2 Statement of the Problem

Managerial accounting practices are usually intended to improve firms’ performance.

According to Alleyne and Weekes-Marshall (2011), management accounting practices

have long been associated with providing management solutions for the internal

management purposes especially in the manufacturing sector. Uyar (2010) noted that the

perceived importance of managerial accounting is driven by decreasing profitability,

increasing costs, competition, and economic crises. Horngren et al., (2009) argue that

manufacturing companies use management accounting techniques like budgeting,

variance analysis and breakeven analysis to assess their operations. These methods help

organizations to plan, direct and control operating costs and to achieve profitability.

Despite the recognized importance of MA practices to the success of organizations, local

manufacturing firms have been slow in utilizing the MA practices as compared to

multinational firms. The advance of competition, production technology, product

diversification, increased costs and business environment has brought significant

challenges for managers and pressures on management accounting to change (Ahmad,

2012; Mbogo, 2011).

The role of the manufacturing sector in Vision 2030 is to create employment and wealth

(Kenya Association of Manufacturers, 2010). Kenya Vision 2030 identifies the

manufacturing sector as one of the key drivers’ for realizing a sustained annual GDP

growth of 10per cent. The sector’s contribution to GDP however has been on the decline

worsening from 9.6 per cent in 2011 to 9.2 percent in 2012, while the growth rate

deteriorated from 3.4 per cent in 2011 to 3.1 per cent in 2012 (Kenya Association of

Manufacturers, 2010). In addition to this, the manufacturing companies in Kenya are

currently facing many challenges that contribute in a major way to the poor financial

performance of these companies. Accordingly, these manufacturing firms in Kenya

employ simple or traditional managerial accounting practices like emphasizing on direct

5

labour and raw materials as cost drivers or looking at profitability of a business unit after

the end of a given period (Mbogo, 2011).

Kamilah (2014) researched the appropriation of the board bookkeeping rehearses in

Malaysian Small and Medium-Sized Enterprises. Akenbor and Ibanichuka (2012) found

out that managerial accounting is practiced by Nigerian Banks in an attempt to boost up

the market value of shares, and as a result, users of accounting information are adversely

affected. Thanju (2009) conducted a study on determinants of management accounting

changes in three private Hospitals in Nairobi during the study period. Kamau (2016)

investigated the effect of management practices on creative accounting among

corporations Listed at the Nairobi Securities Exchange. Despite these research studies

being vital, there is still widespread lack of management accounting practices for decision

making and lack of technical skills for enhancing financial performance of firms which is

a major obstacle to financial performance of manufacturing companies in developing

countries like Kenya. It was due to this dearth that the study sought to investigate the

effects of managerial accounting practices on financial performance of manufacturing

firms in Kenya with a focus on manufacturing firms in Industrial Area Nairobi.

1.3 Purpose of the Study

The purpose of this study was to investigate the effects of managerial accounting

practices on financial performance of manufacturing firms with a special focus on

manufacturing firms in Industrial Area Nairobi, Kenya.

1.4 Research Questions

The research questions in the study were:

1.4.1 What are the effects of activity-based costing on the financial performance of

manufacturing firms in Industrial Area Nairobi?

1.4.2 How do budgeting practices affect the financial performance of manufacturing firms

in Industrial Area Nairobi?

1.4.3 What are the effects of cost-volume profit analysis on the financial performance of

manufacturing firms in Industrial Area Nairobi?

6

1.5 Importance of the Study

1.5.1 Importance to Manufacturing Firms

The study would show the managerial accounting practices that play a part in the

financial health of a firm through improving financial performance. It would also help

organizations and competitors become aware of the tools, methods and techniques

available to them in a bid to control costs and maximizing profits. The findings of this

study would also be invaluable to manufacturing firms in Kenya as they would be able to

understand vividly the role that of managerial accounting practices play on financial

performance. The recommendations given in the study would help the manufacturing

firms as well as other sectors in Kenya by equipping them with adequate tools to get the

solutions to the problems posed by the identified aspects.

1.5.2 Importance to Academicians and Researchers

The study would form basis or foundation for further studies and critique to be done by

academic scholars interested in pursuing Accounting profession. The documented report

of this study would be easily acquired in the library and it would equip the learners with

more knowledge and skills on factors that influence the adoption of management

accounting practices. The study would further make a myriad contribution to the literature

on adoption of managerial accounting practices among manufacturing firms in Kenya

which would be part of articles that would be useful to researchers who want to further in

this study and to other wider stakeholders in academic circles.

1.5.3 Importance to Investors

The study would enable the investor to consider and analyze whether a company pursue

tight cost control policies, perform project appraisal before engaging in a project, have a

future plan for the business in terms of market expansions, revenue growth and

profitability improvement before making a decision on whether to invest in an

organization. By using the study results, the investors in the sector would be in a better

position to understand influence of management accounting practices on financial

performance and be conversant with best solutions in regards to business performance

and sustainable profitability.

7

1.5.4 The Government

The government would be able to understand the factors that influence the adoption of

management accounting practices among manufacturing firms in Kenya and the extent to

which the policies drafted affect manufacturing firms. Additionally, since the study would

draw attention to the factors that influence the adoption of management accounting

practices among manufacturing firms, the study would provide useful insights to the

government and the policy makers for adaptive and creative strategies which would be

consistent with current economic and competitive environmental realities. The

government through various stakeholders would facilitate development of operational

policies that would ensure rapid growth of the sectors hence immense contribution to the

economy as well as job creation opportunity.

1.6 Scope of the Study

The focus of this study lay on investigating the effects of managerial accounting practices

on financial performance of manufacturing firms with a special focus on manufacturing

firms in Industrial Area Nairobi, Kenya. The study focused on identifying the managerial

accounting practices adopted by manufacturing firms in Kenya with a special focus on

manufacturing firms in industrial Area Nairobi and went deeper to establish how these

practices have influenced the financial performance of the firms.

Conceptually, the study concentrated on the effects of activity-based costing, budgeting

practices and cost-volume profit analysis on the financial performance of manufacturing

firms in Industrial Area, Nairobi. The target respondents of the study were the employees

and owners of the manufacturing companies and the frame covered was from August to

September 2017.

1.7 Definition of Terms

1.7.1 Activity-Based Costing

Activity-based costing (ABC) is a costing methodology that identifies activities in an

organization and assigns the cost of each activity with resources to all products and

services according to the actual consumption by each activity (Isa & Thye, 2006).

8

1.7.2 Budgeting

A budget is used by institutions in setting priorities by allocating scarce resources to those

activities that are most important to the organization (Goldstein, 2005). Most of the

manufacturing companies use budgeting control in managerial accounting.

1.7.3 Cost-Volume-Profit (CVP) Analysis

Cost Volume Profit analysis is a planning device that considers the inherent relationship

between Cost, Volume of production and the profit that is made (Nweze, 2011). It is a

technique for evaluating the effect of changes in Cost and Volume on Profit. Cost simply

means the resources used up in achieving a particular objective measured in money terms.

1.7.4 Financial Performance

Financial performance is broadly defined as a subjective measure of how well a firm can

use assets from its primary mode of business and generate revenues (Mills, 2008).

Financial performance is a composite of an organization’s financial health, its ability and

willingness to meet its long-term financial obligations and its commitment to provide

services in a foreseeable future (Weber, 2008).

1.7.5 Management Accounting

Management accounting is the application of appropriate techniques and concepts in

processing historical and projected economic data of an organization to assist

management to establish plans for reasonable economic objectives in making rational

objectives (Ballada, 2012).

1.7.6 Management Accounting Practices

Management accounting practices is defined as a variety of methods specially considered

for manufacturing businesses so as to support the organization’s infrastructure and

management accounting processes (Ittner & Larcker, 2002).

1.7.7 Performance

Performance is the outcome of all of the organization's operations and strategies.

Measuring financial performance accurately is critical for accounting purposes and

remains a major concern for most organizations (Jensen, 2001).

9

1.8 Chapter Summary

This chapter briefly introduced the concept of managerial accounting and managerial

accounting practices adopted by firms as a proactive measure to help in improving

financial performance. The first section discussed the back ground of management of

accounting and practices adopted in improving financial performance. The second section

sought to establish the problem at hand. The third section gave a summary of the purpose

of the study. The fourth section summarized the research questions. The fifth section

highlighted the importance and value of study. The sixth section specified the scope of

the study while the seventh sections gave definitions of the terms used.

Chapter two broadly explored about existing literature on managerial accounting studies

and practices. It expounded on the managerial accounting tools adopted by manufacturing

companies as a whole and how they in turn affect performance of the organizations. This

included activity based costing, budget practices and cost-volume profit analysis. Chapter

discussed the research methodology, while chapter four presented the results and findings

of the study, and chapter five focused on the discussions, conclusions, and

recommendations of the study.

10

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter presents a review of literature on managerial accounting concepts. The

research has drawn materials from several sources which are closely related to the theme

and the objectives of the study. The chapter focuses on aspects of management

accounting including activity based costing, budget practices and cost-volume profit

analysis. This is followed by a summary of the literature review.

2.2 Effect of Activity based Costing on Financial Performance

2.2.1 Organization Performance

Performance refers to outcomes, end results and achievements arising out of

organizational activities. According to Carton (2004), performance refers to the metrics

relating to how a particular request is handled, or the act of performing; or on the other

hand accomplishing something effectively; utilizing information as recognized from

simply having it. Griffins (2006) defines firm performance as the measure of standard or

prescribed indicators of effectiveness, efficiency, and environmental responsibility such

as, cycle time, productivity, waste reduction, and regulatory compliance. According to

Rickard and Kono (2013), organizational performance encompasses three specific areas

of firm outcomes which include financial performance (profits, return on assets and return

on investments), product-market performance (sales and market share) and shareholder

returns (total shareholder return and economic value added).

A firm’s success, conditions and compliance is measured through performance.

According to Fitzgerald (2000), the common assumption which underpins much of the

performance research and discussion is that increasing performance leads to improved

functions and activities of organizations. Tidd, Bessant and Pavitt (2001) observed that in

today's dynamic and global competitive environment, firm performance has become more

pertinent, mostly due to trends in concentrated international competition, disjointed and

challenging markets as well as assorted and swiftly changing technologies. This study

sought to establish the changes in performance of manufacturing firms as a result of

adopting managerial accounting practices.

11

2.2.2 Activity-Based Costing

Activity-based costing (ABC) is an accounting methodology that identifies activities in an

organization and assigns the cost and resources to all products and services according to

their relative consumption (Isa & Thye, 2006). According to Seal, Garrison and Noreen

(2006), ABC assigns more indirect costs (overhead costs) into direct costs compared to

conventional costing. ABC recognizes that in modern businesses, most of the costs are

determined by the number of activities related to a product or service (Seal et. al. 2006).

The key to effective cost control may therefore lie in optimizing the efficiency of the

activities that relate to a product or a service. Rehman (2010), while analyzing MA

techniques in Pakistani manufacturing firms indicated that utilization of ABC is

reportedly used by about 50% of the firms. Of those that reported high usage of variable

costing, textile and cement sector comprised 68%. It was found that the profitable firms

using two management accounting techniques; target costing and activity based

management had significant impact on profitability at 6.4% and 8.2%, respectively.

ABC improves coordination among different units and departments within a company.

Unit costs are calculated more accurately and do change according to seasonal

fluctuations since they are not calculated by use of a single cost driver related to

sales/production volume such as direct labor/machine hours (Saygili, 2007). According to

Salawu, Oyesola and Tajudeen (2012), ABC provides more accurate cost data needed to

make appropriate strategic decisions about product mix, sourcing, pricing, process

improvement, and evaluation of business process performance. These claims have led

many firms to adopt ABC systems (Salawu et al., 2012). Schoute (2011) examined the

associations between product diversity, usage of advanced manufacturing technologies

and activity-based costing adoption. According to Schoute (2011), product diversity, on

average, is positively related to both activity-based costing adoption and activity-based

costing ABC use, and also that these relationships are indeed inverted U-shaped.

Pike, Tayles, Mansor (2011) examined user perceptions of activity based costing and

performance for three different types of systems in a major information and

communication provider in South East Asia. Their results showed that both the

development inputs and user performance perceptions varied with the type of system

(embedded, stand-alone, ad-hoc). On the other hand, embedded systems enjoyed far

12

stronger inputs (e.g. top management support, rewards and recognition, task significance)

and greater development team cohesion than stand-alone systems, they were perceived by

users to perform significantly less well. These findings suggest that system type is an

important factor in assessing ABC performance (Pike et al., 2011).

2.2.2.1 Standard Costing

According to Hilton (2008), standard costing is a performance appraisal technique used to

measure actual performance against the standards for all areas of operations with the

organization. Standard costing is concerned with measures of efficiency, which describes

how managers can have control over the acquisition and use of resources in producing a

given quality of output. Horngren, Datar, Foster, Rajan and Ittner (2009) argue that

Standard costing technique therefore represents an integral part of management

accounting control technique which will also include budgeting system and responsibility

accounting statement. Bredmar (2011) noted that standard costs have a desirable

motivational impact on employees especially when combined with incentives for

continuous improvements. Bredmar (2011) also argue that standards represent reasonable

future performance and not forceful goals. Unfavorable variances however indicate

performance that does not meet reasonable expectations and therefore the managers in

organisations like the banking sector should set standards that employees regard as

motivating to fulfil.

Horngren (2008) established that standard costing has been widely used in developed

countries. Although the main purpose is to control costs, standard costing has also

contributed to managerial activities such as budgeting and product pricing. Surveys that

were performed during the 1980s and 1990s showed that production firms mostly used

standard costing systems. The reported usage rates were 65% in Japan, 73% in Sweden,

76% in England, 84% in Ireland and 86% in USA. (Horngren, 2008).

Mitchell (2005) indicated that standard costing has been considered a very useful

technique for cost control, performance evaluation and determining the product costing.

According to Eyisi (2009), standard cost acts as a yardstick where actual costs are

compared with standard costs. This means that standard costing provides basis whereby

performance is measured on the basis of what product to produce, how much quantity to

13

use and the expected levels of activity which are compared with the actual results

obtained and provides a basis for regular checks on expenditure incurred. This provides a

basis for regular checks and control materials, price usage, labour costs and overhead

expenditures.

2.2.2.2 Lifecycle Costing

Life cycle costing (LCC) is a technique to estimate the total cost of ownership and is

applied to quantifying costs of whole buildings, systems, and/or building components and

materials. According to Bredmar (2011) the objective of LCC analysis is to choose the

most cost effective approach from a series of alternatives so the least long term cost of

ownership is achieved while considering cost elements which include design,

development, production, operation, maintenance, support, and final disposition of a

major system over its anticipated useful life span. LCC is the sum of acquisition, logistic

support and operating expenses (Luther & Longden, 2001).

Lifecycle costing takes into account all the costs incurred throughout a product’s life

(Seal, Garrison & Noreen, 2006). Seal et al. (2006) noted that lifecycle costing recognizes

the manager’s ability to influence the cost of manufacturing a product or offering a

service is at its best when the product or the service is at the design stage of its lifecycle.

This is because small changes to the product or service design may lead to significant

savings in the cost of manufacturing an item or offering a service. Based on this, the

management accounting function in an organisation such as a bank should evaluate

precisely the cost of offering a product or a service in order to offer a product that is cost

effective and that creates competitiveness for the organisation.

Horngren et al. (2009), note that periodic comparisons between planned costs and

revenues and actual costs and revenues allows managers to assess the true profitability

level of a product, determine its current lifecycle stage and modify the strategy. Hyvönen

(2003) in a Finnish study established that only 5% of large industrial companies had used

life cycle costing. Sterner (2000) in a Swedish building industry study established that

66% of the companies used life cycle costing to assist on decision making, while 40% of

city administrations in USA use life cycle cost analysis when assessing their building

projects.

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2.2.2.3 Target Costing

Target costing is an approach employed in firms to determine a product's life-cycle cost

which should be sufficient to develop specified functionality and quality, while ensuring

its desired profit (Adler, Everett & Waldron, 2000). It is a cost management tool for

minimizing the general cost of a product over its product life cycle (Jalaee, 2012). Target

costing involves setting a target cost by subtracting a desired profit margin from a

competitive market price. According to Dugdale and Jones (2002), target costing gives

organizations an aggressive edge as it gives constant enhancement both at the plan and

generation stages.

Fridh & Borgenas (2003) studied the use of target costing on Swedish manufacturing

firms. In the study, 91 out of 250 selected companies answered the questionnaire.

Through random sampling, primary data was collected comprising of 277 multiple choice

questions. The results showed that 16.5 % of manufacturing firms in Sweden use target

costs and such companies using it are larger companies having a differentiation strategy

and which operates in highly competitive environments.

2.2.3 Activity Based Costing and Financial Performance

Activity Based Costing is a classification system that allocates time and money in cost

management and allows firms to deal with multiple product lines and multitude of stock-

keeping units. Mohan and Patil (2003), ABC is a costing model which is used to measure

activity costs, results, resources and cost objects. Pavlatos and Paggios (2008) contend

that ABC is an essential action method that follows the Pareto Principle concerning an

organization’s arrangement of stock (Ramanathan, 2006). According to Flores and Clay

(2012), activity based approaches reinforce a horizontal process view of the organization

cutting across departmental borders. The process model facilitates the integration of

budgets with other management initiatives, such as performance measurement systems

focused on cause-effect or lead-lag relationship s (e.g. balanced scorecards).

Anand, Sahay and Subhashish (2004) in their study of cost management practices in India

obtained responses from 53 CFOs in Indian corporations. The objective of their study was

to capture the development in cost management practices such as accounting for

overheads, applications of budgetary control and standard costing in corporate India. The

15

survey questionnaire also aimed to verify any significant difference in management

motivation for the implementation and use of standard costing as a control tool between

firms that use activities based cost management (ABCM) and firms using traditional

costing systems. The study established that the firms are successful in capturing accurate

cost and profit information from their ABC cost systems for value chain and supply chain

analysis.

Salawu, Oyesola and Tajudeen (2012) did a survey of Activity Based Costing adoption

among Manufacturing Companies in Nigeria. The study revealed that inability of the

traditional cost systems to provide relevant cost was the most highly ranked reason in

their decision to adopt ABC. The researchers found a positive association between the

adoption of ABC and company characteristics (e.g. degree of customization, pressure of

competition, business size, and proportion of overhead to total cost). However, none of

the differences was found to be significant at 10% level. Isa and Thye (2006) examined

the usage of management accounting practices in manufacturing firms in Malaysia. They

also studied the relationship between product variety, complexity of production process,

level of competition, company size, overhead expenses and usage of advanced

management accounting practices.

2.3 Effect of Budgeting Practices on Financial Performance

2.3.1 Budgeting Practices

According to Goldstein (2005), a budget is used by institutions in setting priorities by

allocating scarce resources to those activities that are most important to the organization.

Premchand (2004) states that a budget is a company policy and determines the manner in

which resources are managed. The financial task in budget implementation includes

spending the specified money, maximizing savings and avoiding over expenditures at the

end of the financial year. Frucot and Shearon (2001) argue that implementation of the

budget require an advance program of action evolved within the parameters of the end of

the budget and means available. According to Horngren (2008), effective budget

implementation is usually assessed by addressing various variances between the actual

performance and budgeted performance. Spending plans assume a noteworthy job in

arranging and encourage interdepartmental correspondence and coordination.

16

Spending plans likewise aid designation of rare assets all the more productively.

Moreover, spending plans may likewise be utilized as an apparatus to assess the

divisional or administrative execution (Garrison and Noreen, 2003). The planning

procedure, as customarily rehearsed, is essentially an activity in defending the expansion

and decline in the earlier year's spending. Sulaiman et al. (2002) reviewed 61

organizations in the modern and shopper items parts of the Kuala Lumpur Stock

Exchange's (KLSE) primary board and found that 98 percent of the study respondents

utilized spending plans.

2.3.1.1 Final Budget Authorisation

Lucey (2010) contended that last spending approval is an arrangement evaluated in

money related terms, arranged and affirmed preceding a characterized timeframe, as a

rule indicating arranged pay to be created, use to be brought about amid the period and

the cash-flow to be utilized to keep up the given target. According to Pavlatos (2008), in a

study of management accounting practices in the Greek hospitality, it was established that

97% of the senior management in hospitality firms had the greatest influence as compared

to the supervisors with 29%. In India, Joshi (2001) studied expansive and medium

estimated firms to analyze the rate of reception of the executives bookkeeping systems

and the director's recognitions towards the advantages of the methods and their

significance later on.

As indicated by Joshi (2001), all respondents called attention to that they utilized

spending plans for arranging every day activities and money streams. While 93% of their

respondents utilized spending plans for controlling expenses and 91% of them expressed

that they utilized spending plans for arranging their money related position. Joshi (2001),

likewise uncovered that Indian firms apparent planning to be among essential

administration bookkeeping instruments later on. While thinking about apparent

advantages, the operational spending plan was positioned 22 and 8 with regards to future

accentuation. Also, money spending plan had a position of 5 in saw advantages and 1 in

future accentuation, separately.

2.3.1.2 Budget Participation

Melek (2007) did a study on the impact of budget participation on managerial

performance via organizational commitment. He conducted a study on the top 500 firms

in Turkey where the results of this study provided a number of contributions to

17

management accounting literature by improving understanding of budget participation

and organizational commitment affecting managerial performance. According to their

regression analysis, the effects of budget participation on managerial performance are

positive and significant. The study further found that the managerial performance scores

were found to increase when the interaction score between budget participation and

organizational commitment increase.

Amalokwu and Obiajulum (2008) investigated budgetary and management control

practices where budget was the tool for management control in Guinness Nigeria plc. The

study was based on a qualitative approach in data collection, data analysis as well as

critiques to the method use. A sample of 50 respondents was used. The research

conclusion was that budgets could facilitate the creating and sustaining of competitive

advantages. Tsui (2001) conducted a study based on China and Caucasian cultures points

that the interaction effects of management accounting system and budget participation on

managerial performance were different, because of the cultural background of managers.

More specifically, Tsui (2001) put forward the observation that the relationship between

management accounting system information and managerial performance of Chinese

participation is negative but positive for Caucasian managers. Past studies consider

organizational culture as an element of organizational structure as in Brownell

technology.

2.3.1.3 Budget Process

Budgeting process pushes managers to take time to create strategies, targets and goals

before activity begins. Budget preparation helps management focus on the next month or

the entire coming year. The budgeting process forces managers to assess current

operating conditions and aids in forecasting and implementing needed changes. As

Kariuki (2010) argues, budget preparation is also an excellent vehicle with which to work

with all supervised personnel by requesting their managers and their staffs to participate.

At the end of a period the budget helps managers evaluate performance, locate

problematic areas, bottlenecks and provide solutions to these problems. Conventional

budgeting concentrates on expenditures by budget centers under conventional cost

headings for example salaries, telephone and travelling expenses. These are sometimes

known as line items budgets as there is a line for each expenditure item (Kariuki, 2010).

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2.3.1.4 Budgetary Control

Budget control is key to good management. The process of developing financial plans for

a company’s expected operations and controlling operations which help to carry out those

plans is known as budgetary control. Objectives of budgetary control are: To aid in

establishing procedures for preparing a company’s planned revenues and costs. Budgets

also aid in coordinating and communicating these plans to various levels of management

(Kariuki, 2010). In addition, budgets formulate a basis for effective revenue and cost

control. For companies to benefit from budgetary control, they first set quantitative goals,

define the roles of individuals, and establish operating targets.

Short term or one year plans are generally formulated in a set of period budgets. A period

budget is a forecast of operating results for a segment or function of a company for

specific period of time. In practice, most of the manufacturing companies use period

budgets as their budgetary control (Amalokwu & Obiajulum, 2008). They follow several

management accounting tools such as knowledge of responsibility accounting reporting

systems, cost behavior patterns, and the use of cost, volume-profit analyses help

management project revenues and costs for departments or products. A profit planning in

itself is possible only after all cost behavior patterns have been identified.

2.3.2 Budgeting and Financial Performance

Budgeting can support financial performance management by integrating known financial

outcomes with frequent re-forecasting of the budget and linked to analysis of performance

trends (Melek, 2007). The emergence of scientific management philosophy laid emphasis

on detailed information as a basis for taking decisions thus leading to tremendous

development of management accounting and budgeting techniques (Bartle, 2008). At

early stage of development, budgeting was concerned with preparing and presenting

credible information to legitimize accountability and to permit correct performance

evaluation and consequently, rewards (Hindereth, 2002), However, over the years, the

function and focus of budgeting has shifted considerably as business organization became

more complex and their environment become dynamic.

Bartle (2008) indicates that budgets today provide a focus for the organization, aid in the

coordination of activities and facilitates control. Through budgeting, both management

19

level and operation level looks at the future and lays down what has to be achieved,

controls and checks whether the plans are being realized, and put into effect corrective

measures, where deviation or short-fall is occurring (Bartle, 2001). Bartle emphasized

that without effective controls, an enterprise was at the mercy of internal and external

forces which can disrupt its efficiency, and if caught unaware, such enterprise will not be

able to combat such forces. When budgeting and control systems are in use, budgets are

established which set out in financial terms, the responsibility of managers in relation to

the requirement of the overall policy of the company.

Qi (2010) conducted a study on the impact of the budgeting process on performance in

SMEs in China and the main empirical question for the study was whether the budgeting

process significantly and positively impacts the performance of Chinese SMEs. There

was a positive effect of the formal budgeting process on firm performance. First, the

study revealed that more formalized budgeting planning leads to higher sales revenue.

Secondly, budget goal characteristics strongly affect the budgetary performance of

Chinese SMEs, thus clear budget goals lead to higher goal achievement, whereas,

difficult (but attainable) budget goals increase the motivation of employees to achieve

budget standards. Thirdly, the study discovered that a more formalized budgetary control

tends to lead to a higher growth in profit of a firm.

A study on challenges facing budgetary control systems in developed countries by

OECD, (2007) showed that budgets fail due to reasons which include managers’ lack of

training, funding delays and macro-economic changes. Melek (2007) did a study on the

impact of budget participation on managerial performance via organizational

commitment. He conducted a study on the top 500 firms in Turkey the results of this

study provided a number of contributions to management accounting literature by

improving understanding of budget participation and organizational commitment

affecting managerial performance. First, according to regression analysis results, this

study suggested that the effects of budget participation and organizational commitment by

itself on managerial performance are positive and significant second this study found out

that the managerial performance scores were found to increase when the interaction score

between budget participation and organizational commitment increase.

20

Amalokwu and Obiajulum (2008) investigated budgetary and management control

practices. The study was described based on a qualitative approach in data collection

(primary data) research purpose, data analysis as well as critiques to the method use. A

sample of 50 respondents was used. The research conclusion was that budgets could

facilitate the creating and sustaining of competitive advantages by enabling the following

management functions. Mohammed and Ali (2013) in a study “the relationship between

budgeting and performance of Remittance companies in Somalia” concluded that the

correlation between budgeting and firm performance is 0.514, which means that one level

increase of budgeting effectiveness will lead to 0.514 higher firm performance. The

probability of this correlation coefficient occurring by chance is 0.00. This coefficient

shows that a statistically significant moderate positive relationship between budgeting and

firm performance.

2.4 Effect of Cost Volume Profit Analysis on Financial Performance

2.4.1 Cost-Volume-Profit analysis

Cost-Volume-Profit (CVP) analysis is a useful tool in understanding the inherent

relationship between Cost, Volume of operation and profit. CVP examination, as per

Hilton (2008) is a scientific portrayal of the financial aspects of delivering an item. CVP

investigation is the methodical examination of the interrelationship between moving

costs, deals and creation volume, cost, costs and benefits (Glautier and Underdown,

2001). This definition explains cost-volume profit analysis to be a commonly used tool

providing management with useful information for decision making. CVP examination

will likewise be utilized on settling on essential and sensible choice when a firm is looked

with administrative issues which have cost volume and benefit suggestions.

The connection between an items income and cost work communicated inside the cost-

volume-benefit investigation are utilized to assess the money related ramifications of a

wide scope of vital and operational choices. CVP is among the most incredible assets that

assistance supervisors in arranging and basic leadership (Garrison and Noreen, 2003;

Hansen and Mowen, 2002). Jhigan and Stephen (2007) defined CVP analysis as a vital

importance in determining the practical application of cost function, i.e. function of three

factors; sales volume, cost and profit. It aims at classifying the dynamic relationship

existing between total cost and sale volume of a company. It helps to know the operating

21

condition that exists when a company breaks-even, that is when sales reach a point equal

to all expenses incurred in attaining that level of sales.

Jhigan and Stephen (2007) pointed that CVP analysis evaluates the relationship among

these interacting variables and the effect any changes in these variable have on an

organization’s profits. The analysis proceeds on the basis of cost in an organization and

the profit. In other words, the inter-play of cost and quantity enables the organization

observes its profit motive. CVP enables administrators to comprehend the

interrelationship between the amount sold, cost, moving cost and benefit. A few directors

opine that the apparatus may have minimal because of constraining presumptions. The

suspicions that moving cost and expenses stay steady over the significant range for

example might be unfeasible because of changing business condition. Further, the

supposition that there aren’t opening and shutting inventories of completed products may

likewise not be reasonable. In that capacity, the CVP strategy may gradually lose its

significance. Be that as it may, experimental consequences of the four nations inspected

uncover something else.

In India Joshi (2001) detailed a 65% appropriation rate among medium and extensive

organizations in their review. In China, Tsui (2001) revealed that the CVP was of unique

enthusiasm to the two scholastics and experts in light of its capacity to interface target

benefit with operational arranging. Since, the idea of commitment edge empowered new

viewpoints on numerous operational issues, this method was received in all huge and

medium estimated ventures.

2.4.1.1 Variable Cost

Variable Costs, also referred to as direct cost, are the cost of raw materials and the direct

cost of converting the raw materials (Garrison & Noreen, 2003). The cost increases or

decreases in a proportionate manner but arbitrarily. These are costs that vary in total with

any changes in output. Examples of variable costs include direct labour, material, energy

costs, packaging sales commissions, etc. Revenue, expenses, volume of activities and

economic results of the enterprises, discussed from the point of view of management

accounting, have been the main object of research scientists including Trifonov (2003),

22

Yonkova (2008) to name but a few. Indeed, the impact of specific factors upon the

subject of business activities has been grossly overlooked in various industry sectors.

Stefanov (2009) and Ivanov (2012) are among those who focused their attention on

existing flaws in accountability, analysis of revenue, expenses and volume of activities in

the hotel industry, however they failed to see their interrelatedness in terms of

management accounting. When reviewing Bulgarian scientific literature, it becomes clear

that alongside general assumptions, authors such as Rupska, Brashev and Tsvetkova

(2010; 2012) bring to the front CVP analysis and its scope of application in terms of

industry sector, many focusing on the agricultural sector in particular, taking into

consideration the specifics of company operations in that particular sector and the way

they are reported in the survey.

2.4.1.2 Fixed Cost

Fixed cost refers to the cost that does not vary in total amount as sales volume or the

quantity of output changes over some relevant range of output. For as long as output

changes, that is increase or decrease within these relevant ranges, there will not be

additional fixed cost. For this reason, this cost does not change with changes in output

within the relevant, range rather it shifts within that range. According to Olagunju (2008)

fixed costs occurs as long as the selling price per unit exceeds the Variable Cost per unit.

This helps to explain why some firms will operate a plant even when sales are

temporarily depressed, that is to provide some increment of revenue towards the coverage

of fixed cost. Examples of fixed costs include rent depreciation, fixed salaries and

insurance.

Abdullahi (2015) depicts cost volume benefit examination as a gauge of how changes in

costs (both variable and settled) deals volume, and value impact the organization's

benefit. Adenji (2008) states that cost-volume benefit examination are foreordained costs,

target costs or cautiously pre-arranged costs which the board tries to accomplish with a

view to building up or achieving greatest productivity in the creation procedure. As per

him, cost-volume-benefit examination is cost designs identifying with a solitary cost unit.

Since cost-volume benefit examination implies to be what cost ought to be, any deviation

speaks to a proportion of execution. The foreordained expenses are known as cost-

23

volume-benefit investigation and the distinction between the cost-volume-benefit

examination and real expenses are known as a change.

2.4.1.3 Mixed Cost or Semi-Fixed or Semi-Variable Cost

Mixed cost or semi-fixed or semi-variable cost refers to cost that are neither strictly fixed

nor strictly variable. It will be strictly fixed and at a point, it will be variable and it will be

strictly variable and at a point it will be fixed. It is difficult to analyze mixed cost but in

doing so, add the total fixed cost and trace that point up to the point where it varies and

add to that total variable. Nweze (2011) noted that cost behavior has substantial effect for

cost control and recovery and consequently, on the short and long-term attitude of a firm

under varying macro-economic conditions.

2.4.1.4 Application of CVP Analysis

Ihemejea, Okereafor and Ogungbangbe (2015) found out that CVP analysis is considered

largely in the decision making process of manufacturing industries and hence affect the

various decisions made by manufacturing industries. Ihemejea et al., (2015) also found

these manufacturing industries adopt both graphical and algebraic approaches to cost-

volume- profit analysis. Ihemejea et al., (2015) further revealed that the application of

cost-volume profit analysis techniques in decision making process to a very large extent

enhance managerial efficiency of manufacturing industries. In addition, it was revealed

that the benefits derived from the application of cost-volume-profit analysis include:

efficient cost control, high productive capacity and increase in profitability.

Taking into account the specifics of the hotel product we cannot but accept as logical the

results on the extent and frequency of application of CVP analysis. Consequently, Nabil,

Osama and Zaid (2014) while looking at the effect of using break-even-point in planning,

controlling, and decision making in the industrial Jordanian companies concluded that,

the most of the Jordanian industrial companies are using break-even point in the planning,

controlling and decision-making, and there is a statistical significant relationship between

the use of the break-even point and successful planning, control and decision-making in

the Jordanian industrial companies. Corroborating the study by Ndaliman and Bala

(2007), Onwuka (2009) suggests a thorough application of breakeven analysis to improve

profit levels of small manufacturing firms. She (Onwuka) further states that the

24

mathematical involvement was little, while the advantage was enormous. Most managers

are too afraid of figures; they would find this method a safe- landing.

2.4.2 Cost Volume Profit Analysis and Financial Performance

Liaqat (2006) carried out an empirical study to find out the application of contemporary

management accounting techniques in Indian industry through a survey of 530 member

companies of the National Association of Financial Directors and Cost Controllers. Sixty-

three companies responded which constituted the sample; a response rate of about 12%.

The focus of the study was to find evidence on how widely traditional and contemporary

management accounting practices were adopted by Indian industry. The investigations by

Liaqat (2006) revealed that improvement of overall profitability and cost reduction were

the motivating factors for using management accounting in Indian companies. The more

the cost acquired for a particular production without corresponding increase in the volume

of production, the more the profits reduce. Therefore, manufacturing industries should

ensure that when cost increases, volumes of production should also increase in order for

the firms to cover the increasing fixed costs and also retain a reasonable profit for the

firm.

Wu and Boateng (2010) argue that the change in management accounting practices may

be influenced by factors such as the size of an organisation, foreign partners and

knowledge of senior managers and employees. They note that the success with which

these factors are known can positively influence the growth of an organisation and the

economy in general. Traditional accounting costing practices do not adequately fulfil their

role especially in inter-organisational accounting practices (Bastl, Grubic, Templar,

Harrison & Fan, 2010). These authors fault traditional costing practices for its inability to

deliver an inter-organisational focus and associated costing information. Georgiev (2014)

studied the Application of Cost-Volume-Profit Analysis in the Hotel Industry based on

survey data of high-ranking hotels in the north-east region of Bulgaria, research results

indicate that analysts apply the CVP analysis to all aspects of management accounting,

which clearly speaks of its significance for generation of data on hotel management.

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2.5 Chapter Summary

This chapter reviewed the literature by other scholars relating to this study where the

effects of managerial accounting practices on financial performance of manufacturing

firms have been reviewed including activity based costing, budget practices and cost-

volume profit analysis. The chapter also presented the theoretical chapter summary. The

following part talks about the exploration technique which covers the examination

structure, populace, test, information accumulation strategies, look into systems and

information investigation techniques.

26

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

This chapter presented the methodology which was followed in completing the study. The

chapter involved a blueprint for the collection, measurement and analysis of data. It

specifically looked at the research design and how this is arrived at, the target population

and how this was selected, sampling design and how the sampling frame and sample size

were selected, data collection procedures, instruments, analysis and presentation of the

collected data. The chapter concluded by a summary of the chapter.

3.2 Research Design

A research design is a plan for selecting subjects, research sites and data collection

procedures to answer the research questions. Cooper and Schindler (2011) defined

research design as a general framework that outlines how the researcher would go about

answering the research questions. Descriptive studies describe characteristics associated

with the subject population. Descriptive research design was used to establish the effects

of managerial accounting practices on financial performance of manufacturing firms in

Kenya with a focus on manufacturing firms in Industrial Area Nairobi. This was relevant

in describing certain variables of interest such as financial performance, effects of

activity-based costing, budgeting practices and cost-volume profit analysis on the

financial performance of manufacturing firms in Industrial Area Nairobi.

The major purpose of adopting descriptive design method is that it measures the accuracy

of the variables. The following part talks about the exploration technique which covers

the examination structure, populace, test, information accumulation strategies, look into

systems and information investigation techniques.

In addition, this design enables the researcher describe the characteristics of the

population being studied as they exist at present hence minimizing biases and maximizing

the reliability of the evidence collected. Finally, this design is chosen because it also

provides a relatively complete picture of what is occurring at a given time and allows the

development of questions for further study. The intention of descriptive research is to

gather data at a particular point in time and use it to describe the nature of existing

27

conditions. The research was quantitative in nature and relied on data obtained from

respondents on effects of activity-based costing, budgeting practices and cost-volume

profit analysis on the financial performance of manufacturing firms in Industrial Area

Nairobi.

3.3 Populations and Sampling Design

3.3.1 Population

Target population represents all cases of people or organizations which possess certain

characteristics; it is the larger group from which a sample is taken. Mugenda and

Mugenda (2008) clarify that the objective populace ought to have some recognizable

qualities, to which the scientist expects to sum up the aftereffects of the examination. This

definition assumes that the population is homogeneous. The study focused on

manufacturing firms in industrial Area Nairobi since it had the highest concentration of

manufacturing firms in Kenya.

According to the Kenya Association of Manufacturers (2016) there were 183

manufacturing companies that formed the target population. The population was chosen

since it was operating in the same area and hence exposed to the same business

environment. For the purpose of this study, the target population consisted of 183 firms

where the top, middle or low level management staffs were involved. As such the main

respondents were general managers, finance managers, sales managers, finance business

partners, chief accountants, factory controllers, finance controllers, cost accountants and

their respective assistants or representatives in the manufacturing firms.

3.3.2 Sampling Design

Kothari (2003) define a sample as part of the target population that has been procedural

selected to represent it. Testing is the way toward choosing units like populace in an

association to frame a populace of intrigue so that by examining, the example may

decently sum up the asset back to the populace in which they were looked over. Sample

design is the method by which the selection of primary elements of study and analysis are

determined in order to respond to the research questions.

28

3.3.2.1 Sampling Frame

The testing outline is that piece of the populace that can be gotten to amid an examination

i.e. the reasonable adaptation of the populace, the ones which can be distinguished and

got to. It comprises of a posting of all examining units. The testing edge might be the

entire populace or part of a populace. The essence of sampling is to allow conclusions

about the entire population to be drawn just by the results or observations of the selected

elements from a population. Bryman (2007) defines a sampling frame as the listing of all

the units in the population from which the researcher can make a sample.

Often times, a researcher may not get direct access to the entire population of interest thus

they rely on the sampling frame to represent the entire population. The study focused on

manufacturing firms in Industrial Area Nairobi which are manufacturing firm and key

players in the sector whose financial performance is of great importance to the

management, employees, investors and the nation in general. The sample of the study

constituted of 183 management staffs.

3.3.2.2 Sampling Technique

According to Howitt and Cramer (2004) the sampling technique is the process of

selecting the specific methodology to use in deciding the entities in the study. The sample

should be as representative as possible of the entire population. Each individual is chosen

entirely by chance and each member of the population has an equal chance of being

included in the sample. This sampling method was suitable because of ease of assembling

the sample and it was also considered as a fair way of selecting a sample from a given

population since every member is given equal opportunity of being selected. The simple

random sampling was representative of the population and offers an unbiased selection

which was important in drawing conclusions from the results of the study. Due to its

representativeness of a sample obtained, it was reasonable to make generalizations from

the results of the sample back to the population.

3.3.2.3 Sample Size

Sample size is finite part of a statistical population whose properties are studied to gain

information about the whole. Sampling is selecting a given number of subjects from a

defined population as representative of that population. A sample was drawn from 183

29

target respondents including the general manager, finance manager, sales manager,

finance business partners, chief accountant, factory controllers, finance controllers, cost

accountants and the respective assistants or representative in manufacturing firms in

Industrial Area in Nairobi where simple random sampling technique was used. The

sample captured 30% of the manufacturing firms in the sampling frame to comprise the

sample as advocated by Gall, Gall and Borg (2003).

The study selected a section and particularly the general manager, finance manager, or

their representatives since they are the ones who are more conversant with the effects of

managerial accounting practices on financial performance of manufacturing firms. From

the above population of 183, a sample was selected in different proportions from within

each group in proportions that each group bore to the study population. This generated a

sample of 54 respondents which the study sought information from.

3.4 Data Collection Methods

Kothari (2004) defined data collection as a means by which information is obtained from

the selected subjects of an investigation. Data collection instruments refer to the tools

used in obtaining information from respondents. The researcher collected data using a

questionnaire. A questionnaire is a systematically prepared form or document with a set

of questions deliberately designed to elicit responses from respondents or research

informants for the purpose of collecting data or information (Kumar, 2011). The

questionnaire method was considered appropriate for this study since it is an inexpensive

method of data collection as it is administered collectively to a study population. It also

offers great anonymity hence respondents are sure of confidentiality.

Primary data collection was via a questionnaire as this is an efficient and convenient way

of gathering the data within the resources and time constraints. The structure of the

questionnaire included structured and semi-structured questions as this provided the

flexibility for specific and unique responses to some of the questions. The questionnaires

contained open ended and closed ended questions all briefly stated and well-focused in

recognition of the busy schedule of the participants. The structured questions are

normally closed ended with alternatives from which the respondent is expected to choose

the most appropriate answer.

30

The main advantage of this type of questions is that they are easy to analyze and require a

lower investment in terms of time. Unstructured questions presented the respondent the

opportunity to provide their own answers. They give the respondents complete freedom

of response and permit an individual to respond in his or her own words. These questions

permit greater depth of response, are simpler to formulate and the response give an

insight into the feelings, background, hidden motives, interests and decisions of the

respondent. The researcher used questionnaires as data collection instruments for the

research.

3.5 Research Procedures

The examination regulated the poll independently to all respondents of the investigation.

The examination practiced consideration and the executives to ensure that the greater part

of the polls issued to the respondents were gotten. So as to accomplish this, the

investigation kept up an enlist of polls, that were conveyed and those which were gotten.

A drop and pick later method was utilized in overseeing the poll. In addition to the

primary data, secondary data was used and collected through desk top research technique

as this was most appropriate for literature and materials. The researcher started by

explaining to all participants in the study the role they were expected to play and the

importance of providing honest information through a cover letter forwarding the

questionnaire.

The researcher also assured the participants that the information they give would be

treated with strict confidence. An envelope marked “questionnaire” and thesis topic was

provided so that once the employee completes the questionnaire, they seal it to ensure

confidentiality is maintained within the organization and guarded against potential

victimization by the human resource division. The researcher then proceeded to

administer the questionnaires through the designated officers and co-ordinate with them

to ensure respondents have adequate time to complete them. The questions included both

closed and open-ended questions with subheadings where necessary to guide the

respondents respectively. The researchers applied the questionnaire randomly to the

respondents, and allow them five weeks to respond, after which the questionnaires were

31

picked and data was analyzed. Both hard and soft copies of the questionnaire were used in

this study.

3.6 Data Analysis Methods

The data collected was first cleaned, then sorted and coded using numerical numbers. The

data was then entered in the SPSS software after which analysis was done. The

quantitative information gathered was investigated by the utilization of spellbinding

measurements utilizing SPSS and introduced through midpoints, least, most extreme,

means and standard deviations. The information was broken down as per the goals of the

examination. Factual Package for Social Sciences (SPSS) adaptation 23.0 was utilized as

an instrument to investigate the information. The data exhibited through utilization of

tables and figures. This was finished by counting up reactions, registering rates of

varieties accordingly and also depicting and translating the information in accordance

with the examination targets and suppositions through utilization of SPSS.

3.7 Chapter Summary

This chapter focused on the research design approach proposed to be employed in the

collection, analysis and presentation of data. The population, sampling techniques i.e.

simple random sampling and reasons for selection of this method has been clearly

documented. The specific instruments to be employed in data collection, analysis and

presentation have been identified and discussed with the merits of the instrument

highlighted. Descriptive and inferential statistical methods were used in analyzing the

data collected using SPSS while content analysis techniques were used to analyze

responses and explanations obtained from the open-ended questions.

Tables and diagrams were used to present and summarize the results and findings

obtained. The next chapter presented the results and findings out of the data that was

collected through the questionnaires as set out in the research methodology. The study

findings were presented on the effects of managerial accounting practices on financial

performance of manufacturing firms with a special focus on manufacturing firms in

industrial Area Nairobi, Kenya.

32

CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

This chapter presents the results established from the data analysis done. This includes

demographic information, effects of activity based costing analysis on financial

performance of manufacturing firms, if budgeting practices affect financial performance

of manufacturing firms and effects of cost, volume, price profit analysis on financial

performance of manufacturing firms.

4.2 Response Rate and Demographical Factors

4.2.1 Response Rate

The research issued a total of 54 questionnaires and a total of 42 were filled and returned

giving a response rate of 78% as indicated in table 4.1, which was sufficient for the study.

Table 4.1: Response Rate

Variable Frequency Percentage

Filled and returned 42 78

Non-response 12 22

Total 54 100

4.2.2 Gender of the respondents

Figure 4.1 indicates that 54% of the respondents’ in the manufacturing sector were male

while 46% of the respondents were female.

Figure 4.1: Gender of the respondents

33

4.2.3 Respondents Age

Figure 4.2 shows that 5% of the total respondents were below 20 years, while 21% were

of between 20 to 29 years. The majority accounting for 38% were aged between 30 to 39

years, and those of 40 to 49 years followed closely at 26%. At the same time respondents

of 50 years and above accounted for 10%.

Figure 4.2: Respondents Age

4.2.4 Work Experience

The study sought to establish the duration the respondents have been working in

manufacturing firms in industrial Area Nairobi and as indicated in figure 4.3.

Respondents with 0-5 years working experience were 29%, 6-10 years was the majority at

40%, those with 11-15 years accounted for 19%, while respondents with 16 – 20 years

accounted for 10%. At the same time respondents with over 20 years’ experience were

only 2%.

Figure 4.3: Work Experience of the respondents

34

4.2.5 Highest Level of Education

To analyse the literacy levels the result established that majority of respondents

accounting for 45% were Diploma holders while 26% had a Bachelor’s degree.

Additionally, certificate holders were 17% and Master’s degree holders represented 10%

while PhD holders accounted for 2% as shown in Figure 4.4 below. This implies that the

response received was precise as the respondents were very literate to comprehend the

questions asked.

Figure 4.4: Highest Level of Education

4.3 Activity Based Costing and Financial Performance

The first objective set to establish how activity based costing affected financial

performance. Respondents were asked a set of questions to indicate to what extent they

agreed or disagreed with statement related to activity based costing and financial

performance. Using a five point Likert scale where 1 – No extent 2 – Low extent 3 –

Moderately 4 – Large extent 5 – Very Large Extent.

4.3.1 Adoption of Activity Based Costing as Management Accounting Practice

The study sought to establish the extent the company adopted activity based costing as a

management accounting practice whereby table 4.2 shows that 9.5% stated to a low

extent, 38.1% to a moderate extent, 40.5% to a large extent and 11.9% to a very large

extent. This indicate that most manufacturing companies in industrial area have adopted

activity based costing as management accounting practice.

35

Table 4.2: Activity Based Costing Adoption

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

4

16

17

5

0

9.5

38.1

40.5

11.9

Total 42 100

4.3.2 Activity Based Costing on Financial Performance

The study sought to establish the extent to which Activity based costing affect financial

performance of manufacturing companies where table 4.3 shows that 2.4% of respondents

stated to a low extent, 47.6% to a moderate extent and 50% to a large extent This indicate

that it was not quite clear to what extent activity based costing affect Manufacturing

companies in industrial area.

Table 4.3: Activity Based Costing Adoption on Financial Performance

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

1

20

21

0

0

2.4

47.6

50

0

Total 42 100

4.3.3 Reasons for Adoption of ABC Costing

The study sought to establish if adoption of ABC costing among manufacturing firms in

industrial area was driven by increased product ranges, competition and increased

overheads whereby table 4.4 shows that 4.8% of respondent stated to a low extent, 31% to

a moderate extent, 42.9% to a large extent while 21.4% stated to a very large extent. This

indicates that respondents agree to a large extent that adoption of ABC costing was as a

result of increase in product ranges, competition and increase in overheads which were

necessary for performance of firm.

36

Table 4.4: Reasons for Adopting ABC Costing

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

2

13

18

9

0

4.8

31

42.9

21.4

Total 42 100

4.3.4 Innovative Techniques and Financial Performance

The study sought to establish if variance analysis combined with innovative techniques

affect financial performance of manufacturing firms whereby table 4.5 shows that 4.8%

of respondent stated to no extent, 11.9% to a low extent, 23.8% to a moderate extent, 50%

to a large extent while 9.5% stated to a very large extent. This indicates the respondents

largely agree that variance analysis is combined with innovative techniques and together

affect the financial performance of manufacturing firms.

Table 4.5: Innovative Techniques and Financial Performance

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

2

5

10

21

4

4.8

11.9

23.8

50

905

Total 42 100

4.3.5 Life Cycle Costing and Costs Incurred through Products Life

The study sought to establish if life cycle costing takes into account all costs incurred

during a products life where table 4.6 shows that 7.1% of the respondents stated to a low

extent, 50% to a large extent while 21.4% stated to a very large extent. This indicates that

variance analysis is combined with innovative techniques and together affect the financial

performance of manufacturing firms.

37

Table 4.6: Life Cycle Costing and Costs Incurred through Products Life

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

3

0

30

9

0

7.1

0

71.5

21.4

Total 42 100

4.3.6 Target Costing on Product’s Life Cycle Cost

The study sought to establish if target costing determines product's life-cycle cost which

are sufficient to develop specified functionality and quality, while ensuring desired

profits. Table 4.7 shows that 16.7% of respondent stated to a low extent, 45.2% to a

moderate extent, 37.5% to a large extent while 2.4% stated to a very large extent. This

indicates that majority of the respondents were almost impartial on whether target costing

determines product’s life cycle costs which are sufficient to develop specified

functionality and quality, while ensuring the desired profits are achieved. However, a

significant number of the respondents agreed to a large extent.

Table 4.7: Target Costing on Product’s Life Cycle Cost

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

7

19

15

1

0

16.7

45.2

37.5

2.4

Total 42 100

4.3.7 ABC and Identifying Inefficiencies

The study sought to establish if ABC helps in identifying inefficient products,

departments and activities to help in allocating more resources to more profitable

products. Table 4.8 shows that 14.3% of respondent stated to a low extent, 28.6% to a

moderate extent, 50% to a large extent while 7.1% stated to a very large extent. This

38

indicates that ABC helps to identify inefficient products, departments and activities which

help in allocating more resources to more profitable products to a large extent. Minority

of the respondents however agreed to a low extent.

Table 4.8: Identifying Inefficiencies and ABC

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

6

12

21

3

0

14.3

28.6

50

7.1

Total 42 100

4.4 Budgeting Practices and Financial Performance

The second research question set to establish how budgeting practices affected financial

performance. Respondents were asked a set of questions to indicate to what extent they

agreed or disagreed with statement related to budgeting practices and financial

performance. Using a five point Likert scale where 1 represents – No extent 2 – Low

extent 3 – Moderately 4 – Large extent 5 – Very Large Extent.

4.4.1 Budgeting Practices as Management Accounting Practices

The study set to establish the extent to which manufacturing companies had adopted

budgeting practices as a management accounting practice where Table 4.9 shows that the

respondents stated 19% to a moderate extent, 59.5% to a large extent and 21.4% to a very

great extent. This indicate that majority of the respondents agreed to a large extent that

manufacturing companies have adopted Management Accounting practices while a

significant number was impartial.

Table 4.9: Budgeting Practices as Management Accounting Practices

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

0

8

25

9

0

0

19

59.5

21.4

Total 42 100

39

4.4.2 Budgets and Allocation of Scarce Resources

The study set to establish if budgets are used to set priorities by allocating scarce

resources to most important activities in the organization. Table 4.10 shows that the

respondents stated 7.5% to moderate extent, 35.4% to a large extent and 57.1% to a very

large extent. This clearly indicates that budgets are used to set priorities through

allocating of scarce resources to most important activities in manufacturing companies.

Table 4.10: Budgets and Allocation of Scarce Resources

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

0

3

15

24

0

0

7.5

35.4

57.1

Total 42 100

4.4.3 Budgets and Interdepartmental Communication

The study set to establish if budgets play a role in planning and facilitating

interdepartmental communication and co-ordination. Table 4.11 shows that the

respondents stated 4.8% to no extent, 14.3% to a low extent, 19% to a moderate extent,

and 52.4% to a large extent while 9.5% stated to a very large extent. This clearly reveals

budgets are used in planning and also facilitate interdepartmental communication and co-

ordination although a significant number had agreed to a low extent.

Table 4.11: Budgets and Interdepartmental Communication

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

2

6

8

22

4

4.8

14.3

19

52.4

9.5

Total 42 100

40

4.4.4 Senior Management and Budget Authorization

The study set to establish if senior management have a great influence on final budget

authorization. Table 4.12 shows that the respondents stated 73.8% to a large extent and

26.2% to a very large extent. This clearly depicts that senior managers have a great

influence on final budget approval as no respondent disagreed or were impartial.

Table 4.12: Senior Management and Budget Authorization

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

0

0

31

11

0

0

0

73.8

26.2

Total 42 100

4.4.5 Participatory Budget and Financial Performance

The study set to establish participation in budgets has a positive influence on financial

performance of manufacturing companies. Table 4.13 shows that the respondents stated

9.5% to a moderate extent, 43.9% to a large extent and 47.6% to a very large extent. This

indicates that participation in budgets has positive influence on final performance.

Table 4.13: Participatory Budget and Financial Performance

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

0

4

18

20

0

0

9.5

42.9

47.6

Total 42 100

41

4.4.6 Budgets and Competitive Advantage

The study set to establish budgets facilitate creation and sustainability of competitive

advantage through enabling management function. Table 4.14 shows that the respondents

stated 16.7% to a low extent, 26.2% to a moderate extent, 35.7% to large extent and

16.7% to a very large extent. 4.8% of the respondent however did not agree. This

indicates that majority of the respondents agreed to a large extent that budgets facilitate

creation and sustainability of competitive advantage in manufacturing firms. A significant

number was impartial about it while only a small number did not agree.

Table 4.14: Budgets and Competitive Advantage

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

2

7

11

15

7

4.8

16.7

26.2

35.7

16.7

Total 42 100

4.4.7 Budget Process and Operation Assessment

The study set to establish budget process forces managers to assess the current operating

conditions. Table 4.15 shows that the respondents stated 11.9% to a low extent, 14.3% to

a moderate extent, 59.5% to large extent and 7.1% to a very large extent. 7.2% of the

respondent however did not agree. This indicates budget process facilitate creation and

sustainability of competitive advantage in manufacturing firms. A small number however

did not agree to this.

Table 4.15: Budget Process and Operation Assessment

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

3

5

6

25

3

7.2

11.9

14.3

59.5

7.1

Total 42 100

42

4.4.8 Budgeting Process and Forecasting

The study set to establish if budgeting process aids in forecasting and implementing the

changes needed. Table 4.16 shows that the respondents stated 9.5% to a moderate extent,

52.4% to large extent and 38.1% to a very large extent. This clearly reveals that budgeting

process in manufacturing firms helps in forecasting as well as is used to implement

required changes.

Table 4.16: Budgeting Process and Forecasting

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

0

4

22

16

0

0

9.5

52.4

38.1

Total 42 100

4.4.9 Budgeting and Revenue Cost Control

The study set to establish if budgets help in formulating a basis for effective revenue and

cost control to ensure better financial performance. Table 4.17 shows that the respondents

stated 14.3% to a low extent, 21.4% to a moderate extent, 47.6% to large extent and

11.9% to a very large extent. 4.8% however did not agree with the statement this shows

that manufacturing companies are convinced that budgets help formulate a basis for

effective revenue and cost control. A significant number however had agreed to a lower

extent.

Table 4.17: Budgeting and Revenue Cost Control

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

2

6

9

20

5

4.8

14.3

21.4

47.6

11.9

Total 42 100

43

4.4.10 Budgeting and Control of Financial Health

The study set to establish if manufacturing companies use period budgets as budgetary

control for financial health. Table 4.18 shows that the respondents stated 7.2% to a low

extent, 11.9% to a moderate extent, 71.4% to large extent and 9.5% to a very large extent.

This shows that manufacturing companies agree that period budgets are used as budgetary

control for financial health.

Table 4.18: Budgeting and Control of Financial Health

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

3

5

30

4

0

7.2

11.9

71.4

9.5

Total 42 100

4.4.11 Cost Behavior Patterns and Revenue Projection

The study set to establish if cost behavior patterns help managers in projecting revenues

as well as departmental costs and product costs. Table 4.19 shows that the respondents

stated 7.2% to no extent, 21.4% to a low extent, 61.9% to a moderate extent, and 9.5% to

large extent. None of the respondents however agreed to a very large extent. This shows

that manufacturing companies are impartial about cost behavior patterns projecting

revenues and product costs as well as departmental costs.

Table 4.19: Cost Behavior Patterns and Revenue Projection

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

3

9

26

4

0

7.2

21.4

61.9

9.5

0

Total 42 100

44

4.4.12 Budgeting and Control Systems

The study set to establish if when a budgeting and control system is in place, budget

which are set in financial terms are established. Table 4.20 shows that the respondents

stated 7.1% to a moderate extent, 50% to large extent and 42.9% to a very large extent.

This shows that manufacturing companies strongly agree that when a budget and control

system is in place, budgets which are set in financial terms are established.

Table 4.20: Budgeting and Control Systems

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

0

3

21

18

0

0

7.1

50

42.9

Total 42 100

4.4.13 Budgets and Managers’ Responsibility

The study set to establish if budget planning sets out the responsibility of managers to the

overall policy of the company. Table 4.21 shows that the respondents stated 9.5% to a

low extent, 28.6% to a moderate extent, and 57.1% to large extent. 4.8% however did not

agree with the statement. The responses show that budget planning sets out the

responsibility of managers to the overall policy of the company to a large extent in

manufacturing companies.

Table 4.21: Budgets and Managers’ Responsibility

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

2

4

12

24

0

4.8

9.5

28.6

57.1

0

Total 42 100

45

4.5 Cost Volume Profit Analysis and Financial Performance

The last objective sought to establish how cost and volume profit analysis affected

financial performance. Respondents were asked a set of questions to indicate to what

extent they agree or disagreed with statement related to cost volume profit analysis and

financial performance and the results were as follows:

4.5.1 Cost Volume Profit Analysis Adoption

The study sought to establish the extent manufacturing firms use cost volume profit

analysis as a management accounting practice. Table 4.22 shows that the respondents

stated 9.5% to a low extent, 33.3% to a moderate extent, 31% to a large extent and 21.4%

to a very large extent. 4.8% however did not agree with the statement. This shows that the

respondents agree that CVP analysis is used moderately and to a large extent in

manufacturing firms.

Table 4.22: Cost Volume Profit Analysis Adoption

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

2

4

14

13

9

4.8

9.5

33.3

31

21.4

Total 42 100

4.5.2 CVP and Sales, Cost and Profit Interrelationship

The study sought to establish the relationship between CVP and organizational cost.

Table 4.23 shows that the respondents stated 9.5% to a low extent, 59.5% to a large extent

and 31% to a very large extent. This reveals that CVP helps managers understand the

interrelationship between the quantity sold, cost, selling price and profit since.

Table 4.23: CVP and Sales, Cost and Profit Interrelationship

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

4

0

25

13

0

9.5

0

59.5

31

Total 42 100

46

4.5.3 CVP Analysis and Decision Making

The study sought to establish whether CVP analysis is used in planning and decision

making in organizations. Table 4.24 shows that while 11.9% of the respondents stated to

no extent, 26.2% stated to a low extent, 28.6% to a moderate extent and 33.3% to a large

extent. This response reveals that managers use CVP analysis in planning and decision

making in manufacturing companies.

Table 4.24: CVP Analysis and Decision Making

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

5

11

12

14

0

11.9

26.2

28.6

33.3

0

Total 42 100

4.5.4 CVP Analysis and Companies Profit

The study sought to establish whether CVP analysis in estimating changes in costs, sales

volume and prices affect companies profit. Table 4.25 shows that despite 4.8% stated to

no extent, 14.7% stated to a low extent, 26.2% to a moderate extent, 36.7% to a large

extent while 17.7% stated to a very large extent. This reveals that CVP analysis help in

estimating changes in costs, sales, volume and price which affect profits of manufacturing

companies.

Table 4.25: CVP Analysis and Companies Profit

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

2

6

11

16

7

4.8

14.7

26.2

36.7

17.7

Total 42 100

47

4.5.5 Fixed Costs and Output

The study sought to establish whether fixed costs are not changed with changes in output

where table 4.26 shows that despite 5.1% of the respondents stated to no extent, 11.9%

stated to a low extent, 15.3% to a moderate extent, 60.5% to a large extent and 7.1% to a

very large extent. This reveals that output changes does not lead to changes in fixed costs

in the short term for manufacturing companies.

Table 4.26: Fixed Costs and Output

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

2

5

6

26

3

5.1

11.9

15.3

60.5

7.1

Total 42 100

4.5.6 Mixed Cost Analysis and Decision Making

The study sought to establish whether mixed costs analysis is used as a tool to provide

manager with useful information in decision making. Table 4.27 shows that while 2.4%

stated to no extent, 11.9% stated to a low extent, 38.1% to a moderate extent, 40.5% to a

large extent and 7.1% to a very large extent. The study reveals that indeed mixed costs

analysis is used to provide managers with useful information which helps in decision

making.

Table 4.27: Mixed Cost Analysis and Decision Making

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

1

5

16

17

3

2.4

11.9

38.1

40.5

7.1

Total 42 100

48

4.6 Management Accounting Practices and Financial Performance

4.6.1 Management Accounting Practices and Financial Performance

Respondents were asked to rate the levels management accounting practices affected the

financial performance of manufacturing firms in industrial Area Nairobi. Table 4.28

shows the respondents stated 16.7% to a moderate extent, 54.8% to a large extent and

28.6% to a very large extent. This reveals that management accounting practices affected

financial performance of manufacturing firms greatly.

Table 4.28: Management Accounting Practices and Financial Performance

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

0

7

23

12

0

0

16.7

54.8

28.6

Total 42 100

4.6.2 Management Accounting Practices and Profits

The study sought to establish to what extent management accounting practices affect the

profits of manufacturing firms in industrial Area Nairobi. Table 4.29 shows that the

respondents stated 20% to a moderate extent, 56% to a large extent and 24% to a very

large extent. This clearly indicates that Managerial Accounting practice affects profits of

manufacturing firms to a great extent.

Table 4.29: Management Accounting Practices and Profits

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

0

8

24

10

0

0

50

56

24

Total 42 100

49

4.6.3 Management Accounting Practices and Net Income

The study sought to establish to what extent management accounting practices affect the

net income of manufacturing firms in industrial Area Nairobi. Table 4.30 shows that the

respondents stated 11.9% to a low extent, 23.8% to a moderate extent, 40.5% to a large

extent and 23.8% to a very large extent. This clearly indicates that Managerial

Accounting practice affects net income of manufacturing companies to a great extent.

Table 4.30: Management Accounting Practices and Net Income

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

5

10

17

10

0

11.9

23.8

40.5

23.8

Total 42 100

4.6.4 Management Accounting Practices and Sales

The study sought to establish to what extent management accounting practices affect the

net income of manufacturing firms in industrial Area Nairobi. Table 4.31 shows that the

respondents stated 19% to a low extent, 31% to a moderate extent, 28.6% to a large extent

and 9.5% to a very large extent. 11.9% however stated to no extent. This indicates that

respondents were almost impartial on the extent to which Managerial Accounting practice

affects net income of manufacturing companies.

Table 4.31: Management Accounting Practices and Sales

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

5

8

13

12

4

11.9

19

31

28.6

9.5

Total 42 100

50

4.6.4 Management Accounting Practices and Total Assets

The study sought to establish to what extent management accounting practices affect the

total assets of manufacturing firms in industrial Area Nairobi. Table 4.32 shows that the

respondents stated 21.4% to a low extent, 31% to a moderate extent, 26.2% to a large

extent and 9.5% to a very large extent. 11.9% however stated to no extent. This indicates

that respondents were almost impartial on the extent to which Managerial Accounting

practice affects total assets of manufacturing companies.

Table 4.32: Management Accounting Practices and Total Assets

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

5

9

13

11

4

11.9

21.4

31

26.2

9.5

Total 42 100

4.6.5 Management Accounting Practices and Current Assets

The study sought to establish to what extent management accounting practices affect the

current assets of manufacturing firms in industrial Area Nairobi. Table 4.33 shows that

the respondents stated 14.3% to a low extent, 28.6% to a moderate extent, 38.1% to a

large extent and 19% to a very large extent. This indicates that respondents were almost

impartial on the extent to which Managerial Accounting practice affects total assets of

manufacturing companies.

Table 4.33: Management Accounting Practices and Current Assets

Variable Frequency Percentage

No Extent

Low Extent

Moderate Extent

Large Extent

Very Large Extent

0

6

12

16

8

0

14.3

28.6

38.1

19

Total 42 100

51

4.7 Inferential Analysis

4.7.1 Correlation Analysis

A Pearson correlation analysis was done to establish the effects of Activity Based

Costing, Budgeting Practices and CVP Analysis on financial performance. The result

yielded a robust positive relationship between financial performance and the variables.

Activity Based Costing (r=.976, p value= .000); Budgeting Practices (r=.964, p

value=.000); and CVP Analyses (r=.975, p value =.000) as indicated in table 4.34 an

increase in combined variables of Activity Based Costing, Budgeting Practices and CVP

Analysis lead to an increase in financial Performance.

Table 4.34: Correlation Analysis

Financial

Performance

Activity Based

Costing

Budgeting

Practice

CVP

Analysis

Financial

Performance

1

Activity Based

Costing

.976**

.000

1

Budgeting

Practices

.964**

.000

.647**

.000

1

CVP Analysis .975**

.000

.720**

.000

.584**

.000

1

4.8 Chapter Summary

This chapter has highlighted results and findings. The first section provided an analysis of

demographic data of the respondents, the second section dealt with data on activity based

costing, the third section looked at the data on budgeting practices, and the fourth section

covered issues of CVP analyses. In chapter five this results are discussed and relevant

conclusions and recommendations made with regard to effects of managerial accounting

practices on financial performance of manufacturing firms in Industrial Area Nairobi,

Kenya.

52

CHAPTER FIVE

5.0 DISCUSSION CONCLUSION AND RECOMMENDATION

5.1 Introduction

This section seeks to analyze the findings and this will be done by comparing them to

previous literature related to managerial accounting practices on financial performance as

discussed in the literature review. This will be organized based on the specific research

questions which sought to establish how activity based costing, budgeting practices and

CVP Analysis as accounting practices affect financial performance.

5.2 Summary of Findings

The purpose of this study was to investigate the effects of managerial accounting

practices on financial performance of manufacturing firms with a special focus on

manufacturing firms in industrial Area Nairobi, Kenya. The research questions in the

study were: What are the effects of activity-based costing on the financial performance of

manufacturing firms in Industrial Area Nairobi? How do budgeting practices affect the

financial performance of manufacturing firms in Industrial Area Nairobi? What are the

effects of cost-volume profit analysis on the financial performance of manufacturing

firms in Industrial Area Nairobi?

The research design employed in this study was descriptive in nature. For the purpose of

this study, the target population consisted of 183 firms where the top, middle or low level

management staffs were involved. As such the main respondents were general managers,

finance managers, sales managers, finance business partners, chief accountants, factory

controllers, finance controllers, cost accountants and their respective assistants or

representatives in the manufacturing firms. The simple random sampling was

representative of the population and offers an unbiased selection which was important in

drawing conclusions from the results of the study. The sample captured 30% of the

manufacturing firms in the sampling frame. Primary data collection was via a

questionnaire as this is an efficient and convenient way of gathering the data within the

resources and time constraints.

The study established that the company adopted activity based costing as a management

accounting practice as agreed by 52.4% of the respondents while it was not conclusive

from the study that activity based costing affect the financial performance of

53

manufacturing firms in industrial Area Nairobi as 50% of the respondents agreed to a

large extent while 47.6% agreed to a moderate extent and 2.4% to a low extent. The study

also revealed that the firm adopted ABC due to increased ranges of products, competition

and increased overhead necessary for performance of this Firm as agreed by 64.3% of the

respondents. It was also established that variance analysis in standard costing is combined

with innovative techniques which affects the financial performance of this Firm as agreed

by 59.5% of the respondents. Lifecycle costing takes into account all the costs incurred

throughout a product’s life as agreed by 92.9% of the respondents. In addition, variance

analysis in standard costing is a systematic approach to the comparison of the actual and

budgeted costs. The finding show that target costing did not strongly determines product's

life-cycle cost sufficient to develop specified functionality and quality, while ensuring

desired profits as agreed by 61.9% of the respondents. The study also show that ABC

helps to identify inefficient products, departments and activities and helps to allocate

more resources on profitable as agreed by 57.1% of the respondents.

An analysis was done to establish the extent budgeting practices affect the financial

performance of manufacturing firms in industrial Area Nairobi. It was revealed that

Budgets are used in setting priorities by allocating scarce resources to those activities that

are most important to the Organization as agreed by 92.8% of the respondents. Budgets

aid planning and facilitate interdepartmental communication and coordination as agreed

by 61.9% of the respondents while senior management have the greatest influence on

final budget authorization of manufacturing firms as agreed by 100% of the respondents.

Budget participation in manufacturing firms have a positive effect on financial

performance of the Firms agreed by 90.5% of the respondents while that budgets facilitate

creation and sustainability of competitive advantages by enabling management functions

as agreed by 52.4% of the respondents. Additionally, budgeting process forces managers

to assess current operating conditions as agreed by 66.6% of the respondents. The finding

also shows that budgetary process aids in forecasting and implementing needed changes

in the manufacturing firms as agreed by 90.5% of the respondents. Budgets formulate a

basis for effective revenue and cost control which ensures better financial performance as

agreed by 59.5% of the respondents. At the same time, it was established that

manufacturing Company uses period budgets as the budgetary control for financial health

as agreed by 80.9% of the respondents. There was however uncertainty of Knowledge of

54

responsibility accounting reporting systems and cost behavior patterns in helping

management to project revenues and costs for departments or products as 61.9%

moderately. When a budgeting and control system is in use, budgets are established

which are set out in financial terms as agreed by 92.9% of the respondents. The study also

established budget planning sets out the responsibility of managers in relation to the

requirement of the overall policy of the Company as agreed by 57.1% of the respondents.

An analysis was also done to establish the effects of cost volume profit analysis on

financial performance of manufacturing companies. The finding built up that CVP

enables administrators to comprehend the interrelationship between the amount sold, cost,

moving cost and benefit as concurred by 90.5% of the respondents. At the same time Cost

Volume Profit Analysis is used in planning and decision making in the manufacturing

companies as agreed by 61.9% of the respondents. It was also established that firms apply

CVP analysis in estimating changes in costs, sales, volume, and price which affect the

company’s profit as agreed by 54.4% of the respondents. Lastly, fixed costs do not

change with changes in output in the short term within the manufacturing functions of this

Firm as agreed by 67.6% of the respondents. It was uncertain whether Mixed Cost

analysis is commonly used tool to provide management with useful information for

decision making for financial performance of this Firm as 38.1% agreed moderately,

11.9% agreed to a low extent, 2.4% did not agree, 40.5% agreed to a large extent

while3.4% agreed to a very large extent.

The study sought to establish how management accounting practices influence the various

aspect of financial performance of manufacturing firms in industrial Area Nairobi. The

findings revealed that management accounting practices to a great extent affected profits,

net income, current assets and current liabilities. It was also revealed that there was

uncertainty of management accounting practices affecting sales and total assets.

5.3 Discussion

5.3.1 Activity-Based Costing and the Financial Performance

The study sought to establish the extent the company adopted activity based costing as a

management accounting practice and the result established that a majority indicated ABC

helps to identify inefficient products, departments and activities and helps to allocate

more resources on profitable products. According to Seal, Garrison and Noreen (2006),

55

ABC assigns more indirect costs (overhead costs) into direct costs compared to

conventional costing. ABC recognizes that in modern businesses, most of the costs are

determined by the number of activities related to a product or service (Seal et. al. 2006).

Similarly, Rehman (2010) while analyzing MA techniques in Pakistani manufacturing

firms indicated that utilization of ABC is reportedly used by about 50% of the firms. It

was found that the profitable firms using two management accounting techniques; target

costing and activity based management had significant impact on profitability. Pike,

Tayles, Mansor (2011) examined user perceptions of activity based costing performance

for three different types of systems in a major information and communication provider in

South East Asia. Their results showed that both the development inputs and user

performance perceptions varied with the type of system (embedded, stand-alone, ad-hoc).

The findings indicated that Variance analysis in standard costing is a systematic approach

in comparing actual and budgeted costs. Horngren, Datar, Foster, Rajan and Ittner (2009)

argue that Standard costing technique therefore represents an integral part of management

accounting control technique which will also include budgeting system and responsibility

accounting statement. Bredmar (2011) noted that standard costs have a desirable

motivational impact on employees especially when combined with incentives for

continuous improvements. Bredmar (2011) also argue that standards represent reasonable

future performance and not forceful goals.

Majority agreed that manufacturing companies has better insight for benchmarking and

budgeting with ABC system. Anand, Sahay and Subhashish (2004) in their study of cost

management practices in India obtained responses from 53 CFOs in Indian corporations.

The objective of their study was to capture the development in cost management practices

such as accounting for overheads, applications of budgetary control and standard costing

in corporate India. The study established that the firms are successful in capturing

accurate cost and profit information from their ABC cost systems for value chain and

supply chain analysis.

The study also revealed that activity based costing program is centralized or highly

coordinated. Activity Based Costing is a classification system that allocates time and

money in cost management and allows firms to deal with multiple product lines and

56

multitude of stock-keeping units. Mohan and Patil (2003), ABC is a costing model which

is used to measure activity costs, results, resources and cost objects. Pavlatos and Paggios

(2008) contend that ABC is an essential action method that follows the Pareto Principle

concerning an organization’s arrangement of stock (Ramanathan, 2006). In addition, it

was also revealed that that a comprehensive activity based costing system of support

services exists, and is characterized by a high degree of integration among departments.

According to Salawu, Oyesola and Tajudeen (2012), ABC provides more accurate cost

data needed to make appropriate strategic decisions about product mix, sourcing, pricing,

process improvement, and evaluation of business process performance. These claims have

led many firms to adopt ABC systems (Salawu et al., 2012). Schoute (2011) examined the

associations between product diversity, usage of advanced manufacturing technologies

and activity-based costing adoption. According to Schoute (2011), product diversity, on

average, is positively related to both activity-based costing adoption and activity-based

costing ABC use, but also that these relationships are indeed inverted U-shaped (Shoute,

2011).

It was established that clearly specified goals and objectives are established for activity

based costing in the Company. According to Flores and Clay (2012), activity based

approaches reinforce a horizontal process view of the organization cutting across

departmental borders. The process model facilitates the integration of budgets with other

management initiatives, such as performance measurement systems focused on cause-

effect or lead-lag relationship s (e.g. balanced scorecards).

The study also show that the firm is successful in capturing accurate information from the

ABC systems for value chain and supply chain analysis. Salawu, Oyesola and Tajudeen

(2012) did a survey of Activity Based Costing adoption among Manufacturing

Companies in Nigeria. The study revealed that inability of the traditional cost systems to

provide relevant cost was the most highly ranked reason in their decision to adopt ABC.

The researchers found a positive association between the adoption of ABC and company

characteristics (e.g. degree of customization, pressure of competition, business size, and

proportion of overhead to total cost). However, none of the differences was found to be

significant at 10% level. Isa and Thye (2006) examined the usage of management

57

accounting practices in manufacturing firms in Malaysia. They also studied the

relationship between product variety, complexity of production process, level of

competition, company size, overhead expenses and usage of advanced management

accounting practices.

5.3.2 Budgeting Practices and Financial Performance

The study revealed that most of the company had adopted budgeting practices as a

management accounting practice. Amalokwu and Obiajulum (2008) investigated

budgetary and management control practices where budget was the tool for management

control in Guinness Nigeria plc. The study was based on a qualitative approach in data

collection, data analysis as well as critiques to the method use. The research conclusion

was that budgets could facilitate the creating and sustaining of competitive advantages.

Tsui (2001) conducted a study based on China and Caucasian cultures points that the

interaction effects of management accounting system and budget participation on

managerial performance were different, because of the cultural background of managers.

More specifically, Tsui (2001) put forward the observation that the relationship between

management accounting system information and managerial performance of Chinese

participation is negative but positive for Caucasian managers. Past studies consider

organizational culture as an element of organizational structure as in Brownell

technology.

The finding also established that Budgets formulate a basis for effective revenue and cost

control which ensures better financial performance. Melek (2007) concurred that

budgeting can support financial performance management by integrating known financial

outcomes with frequent re-forecasting of the budget and linked to analysis of performance

trends. Bartle (2008) indicates that budgets today provide a focus for the organization, aid

in the coordination of activities and facilitates control. Through budgeting, both

management level and operation level looks at the future and lays down what has to be

achieved, controls and checks whether the plans are being realized, and put into effect

corrective measures, where deviation or short-fall is occurring (Bartle, 2001). Bartle

emphasized that without effective controls, an enterprise was at the mercy of internal and

external forces which can disrupt its efficiency, and if caught unaware, such enterprise

will not be able to combat such forces.

58

The findings indicated that budget participation has a positive effect on financial

performance of this Firm. Qi (2010) conducted a study on the impact of the budgeting

process on performance in SMEs in China and the main empirical question for the study

was whether the budgeting process significantly and positively impacts the performance

of Chinese SMEs. There was a positive effect of the formal budgeting process on firm

performance. First, the study revealed that more formalized budgeting planning leads to

higher sales revenue. Secondly, budget goal characteristics strongly affect the budgetary

performance of Chinese SMEs, thus clear budget goals lead to higher goal achievement,

whereas, difficult (but attainable) budget goals increase the motivation of employees to

achieve budget standards. Thirdly, the study discovered that a more formalized budgetary

control tends to lead to a higher growth in profit of a firm.

It was revealed that when a budgeting and control system is in use, budgets are

established which are set out in financial terms. Frucot and Shearon (2001) argue that

implementation of the budget require an advance program of action evolved within the

parameters of the end of the budget and means available. According to Horngren (2008),

effective budget implementation is usually assessed by addressing various variances

between the actual performance and budgeted performance.

Findings also indicated that budgets facilitate creation and sustainability of competitive

advantages by enabling management functions. Battalion and Noreen, (2003) agrees that

financial plans give a way to organizations to assign rare assets all the more effectively.

As verifiably rehearsed, the planning procedure for the most part an activity in defending

the ascent and decrease in the earlier year's costs. As per Sulaiman et al. (2002), studied

61 organizations in the mechanical and purchaser items divisions of the Kuala Lumpur

Stock Exchange's (KLSE) fundamental board and as indicated by his discoveries, 98

percent of the review respondents utilized spending plans.

The results show that budgetary process aids in forecasting and implementing needed

changes in the manufacturing firms. According to Pavlatos (2008), in a study of

management accounting practices in the Greek hospitality established that 97% of the

senior management in hospitality firms had the greatest influence as compared to the

59

supervisors with 29%. In India, Joshi (2001) analyzed the selection rate of the board

bookkeeping procedures, and in addition the supervisor's observations on the advantages

of such devices and their significance later on. They surveyed 60 large and medium size

firms in India. A study on challenges facing budgetary control systems in developed

countries by OECD (2007) showed that budgets fail due to reasons which include

managers’ lack of training, funding delays and macro-economic changes.

5.3.3 Cost-Volume Profit Analysis and Financial Performance

The study established that to a great extent manufacturing firms use cost volume profit

analysis as a management accounting practice. As per Hilton (2008) CVP is a scientific

portrayal of the financial matters of delivering an item. CVP investigation is the

methodical examination of the interrelationship between moving costs, deals and

generation volume, cost, costs and benefits (Glautier and Underdown, 2001). This

definition explains cost-volume profit analysis to be a commonly used tool providing

management with useful information for decision making. Cost volume-benefit

investigation will likewise be utilized on settling on fundamental and sensible choice

when a firm is looked with administrative issues which have cost volume and benefit

suggestions.

Same sentiments were expresses by Ihemejea, Okereafor and Ogungbangbe (2015) who

found out that CVP analysis is considered largely in the decision making process of

manufacturing industries and hence affect the various decisions made by manufacturing

industries. Ihemejea et al., (2015) also found these manufacturing industries adopt both

graphical and algebraic approaches to cost-volume- profit analysis. Ihemejea et al., (2015)

further revealed that the application of cost-volume profit analysis techniques in decision

making process to a very large extent enhance managerial efficiency of manufacturing

industries. In addition, it was revealed that the benefits derived from the application of

cost-volume-profit analysis include: efficient cost control, high productive capacity and

increase in profitability.

At the same time Cost Volume Profit Analysis is used in planning and decision making in

the company. Same findings have been expressed before, for instance a study by Nabil,

Osama and Zaid (2014) while looking at the effect of using break-even-point in planning,

60

controlling, and decision making in the industrial Jordanian companies concluded that,

the most of the Jordanian industrial companies are using break-even point in the planning,

controlling and decision-making, and there is a statistical significant relationship between

the use of the break-even point and successful planning, control and decision-making in

the Jordanian industrial companies. Corroborating the study by Ndaliman and Bala

(2007), Onwuka (2009) suggests a thorough application of breakeven analysis to improve

profit levels of small manufacturing firms. She (Onwuka) further states that the

mathematical involvement was little, while the advantage was enormous. Most managers

are too afraid of figures; they would find this method a safe- landing.

The findings revealed that management accounting practices to a great extent affected

profits, net income, current assets, and current liabilities. The connection between an

items income and cost work communicated inside the cost-volume-benefit investigation

are utilized to assess the money related ramifications of a wide scope of vital and

operational choices. CVP is professed to be a standout amongst the most integral assets

that assistance directors in arranging and basic leadership (Garrison and Noreen, 2003;

Hansen and Mowen, 2002). Jhigan and Stephen (2007) defined CVP analysis as a vital

importance in determining the practical application of cost function, i.e. function of three

factors; sales volume, cost and profit. It aims at classifying the dynamic relationship

existing between total cost and sale volume of a company. It helps to know the operating

condition that exists when a company breaks-even, that is when sales reach a point equal

to all expenses incurred in attaining that level of sales.

It was established that management accounting practices affected the financial

performance of manufacturing firms in industrial Area Nairobi. Liaqat (2006) carried out

an empirical study to find out the application of contemporary management accounting

techniques in Indian industry through a survey of 530 member companies of the National

Association of Financial Directors and Cost Controllers. Sixty-three companies responded

which constituted the sample; a response rate of about 12%. The focus of the study was to

find evidence on how widely traditional and contemporary management accounting

practices were adopted by Indian industry. The investigations by Liaqat (2006) revealed

that improvement of overall profitability and cost reduction were the motivating factors

for using management accounting in Indian companies.

61

5.4 Conclusion

5.4.1 Activity-Based Costing and the Financial Performance

Most firms in the manufacturing sector have adopted the use of activity based costing,

standard costing, life cycle costing and target costing. This is attributed to increased

ranges of products, competition and increased overhead necessary for performance of this

Firm. Variance analysis in standard costing is combined with innovative techniques

which affects the financial performance of this Firm. The findings also show that ABC

helps to identify inefficient products (value destroying), departments and activities and

helps to allocate more resources on profitable products. In addition, there is a high rate of

centralization and coordination. ABC helps to identify inefficient products, departments

and activities and helps to allocate more resources on profitable products.

5.4.2 Budgeting Practices and Financial Performance

Most manufacturing firms have adopted budgeting practices as a management accounting

practice and budget participation, budget process, budget planning also affect financial

performance. Senior administration has the best impact on definite spending approval in

this firm and spending plans help arranging and encourage interdepartmental

correspondence and coordination. Budgets are used in setting priorities by allocating

scarce resources to those activities that are most important to the Organization.

Manufacturing Company uses period budgets as the budgetary control for financial

health.

62

5.4.3 Cost-Volume Profit Analysis and Financial Performance

For manufacturing firm’s sales volume, variable Costs, fixed cost and mixed costs

affected financial performance. At the same time, Most Firms use Cost Volume Profit

Analysis in planning and decision making in the company. Most of the firms also apply

CVP analysis in estimating changes in costs sales volume, and cost-volume-profit

analysis (break-even analysis) is essential for evaluation of major capital investment.

5.5 Recommendation

5.5.1 Recommendation for Improvement

5.5.1.1 Activity-Based Costing and the Financial Performance

There is a need to create awareness on the impact of activity based costing on financial

performance of manufacturing firms in industrial Area Nairobi. Firm’s should also

continue using ABC system in order to identify inefficient products, departments and

activities and helps to allocate more resources on profitable products. The institutions also

need to put up clearly specified goals and objectives in order for activity based costing in

to be effective in the company.

5.5.1.2 Budgeting Practices and Financial Performance

Manufacturing firms should ensure there is ample budget participation and budget control

in order to have control over the financial performance. Budget planning should also be

key to the agenda. The budgets should also have clear goals and objectives of what the

firms intend to achieve, and this is made possible when stakeholders to the budget are

involved. To ensure synergy, approved budgets should always be shared with all

departments. Similarly, deviations from budget targets should also be shared to ensure

that all members are aware, this will facilitate adoption of more control measures.

Managers also need to share with all employees the corrective action taken when

deviations are reported. This will ensure improved learning.

5.5.1.3 Cost-Volume Profit Analysis and Financial Performance

Manufacturing firms need to push for increase in sales volume, minimization of variable

Costs for positive financial performance. Chiefs additionally need to confer with learning

on how CVP helps in the comprehension of the interrelationship between the amount

sold, cost, moving cost and benefit. Cost Volume Profit Analysis is vital in planning and

63

decision making in the company and therefore all manufacturing firms should utilize the

process.

5.5.2 Recommendation for Further Research

Similar research needs to be done in manufacturing firms in other counties and countries

so as to enable generalization of the findings. In addition, more research should be carried

out that also includes those companies in other sectors to establish if they also consider

the management accounting practices as important and to establish the frequency rate of

usage of the practices. Further research is important in other countries with similar or

almost same micro and macroeconomic environments for manufacturing companies. The

findings of which would facilitate a cross-country comparison of the management

accounting practices and their impact on financial performance.

64

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72

APPENDICES

APPENDIX I: RESEARCH QUESTIONNAIRE

USIU-A,

P.O. Box 14634 – 00800,

Nairobi – Kenya.

RE: REQUEST TO PARTICIPATE IN THE STUDY.

My name is Consolata Waihenya, a post graduate student at USIU pursuing a Master’s in

Business Administration (MBA) degree. As part of the study program, am expected to

engage in a field research and produce a research project covering their areas of interest. I

am, therefore, conducting a research on ‘Effects of Managerial Accounting Practices on

Financial Performance: A Case of Manufacturing Firms in Industrial Area in Nairobi,

Kenya’.

I guarantee that the information gathered during this exercise will be used strictly for

academic purposes, and the confidentiality of the respondents’ will be respected.

Therefore, I would like to request for your participation in this exercise. You can, of

course, decide not to answer any uncomfortable questions or to pull out of the interview if

you deem it necessary.

Thank you in advance.

Regards,

Consolata Waihenya.

73

APPENDIX II: QUESTIONNAIRE

Kindly respond to all questions. Tick () the appropriate answer where required. Please

answer these questions as honestly as you can. Your answers will be kept strictly

confidential and please be assured that you will not be victimized for anything written

here. The information collected is intended to be used to pursue academic purposes. I

shall be grateful for your valuable inputs and active co-operation.

SECTION A: GENERAL INFORMATION

1. Tick your gender

Male [ ] Female [ ]

2. What is your age bracket

Below 20 Years [ ] 20 – 29 years [ ]

30 -39 Years [ ] 40 -49 Years [ ]

50 years and above [ ]

3. For how long have you been working in manufacturing firms in industrial Area

Nairobi? (Yrs)

0-5 years ( ) 6-10 years ( )

11-15 years ( ) 16 – 20 years ( )

Over 20 years ( )

4. Indicate the department/section you are currently working………………………

5. What is your highest level of education?

Certificate [ ] Diploma [ ]

Bachelor’s Degree [ ] Masters [ ]

PhD [ ] Others (Specify.....................) [ ]

MANAGERIAL ACCOUNTING PRACTICES & FINANCIAL PERFORMANCE

Activity Based Costing

6. To what extent has this Company adopted activity based costing as a management

accounting practice?

[ ] Very Large extent [ ] Large extent

[ ] moderately [ ] Low extent

[ ] No extent

74

7. To what extent does activity based costing affect the financial performance of

manufacturing firms in industrial Area Nairobi?

[ ] Very Large extent [ ] Large extent

[ ] moderately [ ] Low extent

[ ] No extent

8. To what extent do the following aspects of activity based costing affect the financial

performance of manufacturing firms in industrial Area Nairobi? Use a scale of 1 to 5

where 1= no extent, 2= little extent, 3= moderate extent, 4= great extent and 5 is to a

very great extent.

Aspects of Activity Based Costing 1 2 3 4 5

Standard Costing

Lifecycle Costing

Target Costing

Other ………………………………………

9. To what extent do you agree with the following statements regarding activity based

costing and financial performance of manufacturing firms in industrial Area Nairobi?

Key: 1=Strongly agree; 2=Agree; 3=No comment; 4=Disagree; 5=Strongly Disagree

Statements on Activity Based Costing 1 2 3 4 5

The Company has better insight for benchmarking and budgeting

with ABC system

ABC helps to identify inefficient products (value destroying),

departments and activities and helps to allocate more resources on

profitable products

The activity based costing program is centralized or highly

coordinated

A comprehensive activity based costing system of support

services exists, and is characterized by a high degree of

integration among departments

Clearly specified goals and objectives are established for activity

75

based costing in the Company

The Firm is successful in capturing accurate information from the

ABC systems for value chain and supply chain analysis

Other …………………………………..…………………………

Budgeting Practices

10. To what extent has this Company adopted budgeting practices as a management

accounting practice?

[ ] Very Large extent [ ] Large extent

[ ] moderately [ ] Low extent

[ ] No extent

11. To what extent do the following aspects of budgeting practices affect the financial

performance of manufacturing firms in industrial Area Nairobi? Use a scale of 1 to 5

where 1= no extent, 2= little extent, 3= moderate extent, 4= great extent and 5 is to a

very great extent.

Aspects of budgeting practices 1 2 3 4 5

Budget Participation

Budget Process

Budgetary Control

Budget planning

Other ………………………………………

12. The statements below describe the influence of the budgetary practices on the

financial performance of manufacturing firms. Please indicate your level of agreement

with the statements as regards to the effects of budgeting practices on the financial

performance of manufacturing firms in industrial Area Nairobi? Use a scale of 1 to 5

where: 5=Strongly Agree, 4=Agree, 3=Neutral, 2=Disagree, 1=Strongly Disagree

Statements on budgetary practices and financial

performance

1 2 3 4 5

The long term and short term budget plans have an influence on

76

financial performance of this Company

Our budgets have clear goals and objectives

All departments prepare budget plans prior to the budget year

All the stakeholders to the budget are involved

We are sensitized on the budget control process

Approved Budgets are shared with all departments

Leadership and support is given to all staff throughout the

budgetary process by managers

The use of computers to assist in the budgeting process has

increased its accuracy

The organization has offered training and development programs

to the budget committee members to improve their competency

process and this has led to accuracy of the budgets

Reporting of deviations from budget targets are frequently

reported

The adoption of financial modeling in the budgetary process has

enhanced accuracy of the budget plan

Managers always take corrective action when deviations are

reported

Other ………………………………….………………………

Cost Volume Profit Analysis

13. With regard to this Firm, to what extent do manufacturing firms use cost volume

profit analysis as a management accounting practice?

[ ] Very Large extent [ ] Large extent

[ ] moderately [ ] Low extent

[ ] No extent

14. How would you rate the effects of the following aspects of cost volume profit analysis

affect the financial performance of manufacturing firms in industrial Area Nairobi?

Use a scale of 1 to 5 where 1= no extent, 2= little extent, 3= moderate extent, 4= great

extent and 5 is to a very great extent.

77

Aspects of cost volume profit analysis 1 2 3 4 5

Sales Volume

Variable Costs

Fixed Costs

Mixed Costs

Other …………………………………………...………………

15. What is your level of agreement with the following statements on application of CVP

analysis manufacturing firms in industrial Area Nairobi? Rate on a scale of 1 to 5

where: 5=Strongly Agree, 4=Agree, 3=Neutral, 2=Disagree, 1=Strongly Disagree.

Statements on application of CVP analysis 1 2 3 4 5

CVP helps managers understand the

interrelationship between the quantity sold,

cost, selling price and profit

Cost Volume Profit Analysis is used in

planning and decision making in the

Company

CVP analysis in estimating changes in costs

sales volume, and price affect the company’s

profit

Cost-volume-profit analysis (break-even

analysis) is essential for evaluation of major

capital investment

16. In overall, to what extent do management accounting practices affect the financial

performance of manufacturing firms in industrial Area Nairobi?

[ ] Very Large extent [ ] Large extent

[ ] moderately [ ] Low extent

[ ] No extent

78

17. To what extent do management accounting practices affect the following aspects

financial performance of manufacturing firms in industrial Area Nairobi? Rate on a

scale of 1 to 5 where 1= no extent, 2= little extent, 3= moderate extent, 4= great

extent and 5 is to a very great extent.

Aspects of Financial Performance 1 2 3 4 5

Profits

Net Income

Sales

Total assets

Current assets

Current liabilities

Other ………………………………..………………

What other information would you like to share about the effects of managerial

accounting practices on financial performance of manufacturing firms in Kenya?

……………………………………………………………………………………………

……………………………………………………………………………………………

18. What do you think should be done to enhance the managerial accounting practices

and financial performance of manufacturing firms in Kenya?

……………………………………………………………………………………………

……………………………………………………………………………………………

THANK YOU!!!

79

APPENDIX II: LIST OF MANUFACTURING FIRMS

1. A Plus PVC Technology Co Ltd

2. Acme containers Limited

3. Additive&Chemicals Essential -

ACE

4. Adix plastics limited

5. Advert Plastic Enterprises

6. Aesthetics Limited

7. Afro plastics Kenya

8. Afrtech Enterprises

9. Alankar Industries Ltd

10. Anffi Kenya Ltd

11. Ashut-engineers

12. Asili plastics limited

13. Autosterile EA limited

14. Bahati venture LTD

15. Basco Product (K) Ltd

16. Bayer East Africa Limited

17. Beiersdorf East Africa td

18. Blue Ring Products Ltd

19. BOC Kenya Limited

20. Bonar Limited

21. Bulk Medicals Limited

22. Buyline Industries Limited

23. Carbacid (C02) Limited

24. Central Glass Industries Ltd

25. Chandaria Industries Ltd

26. Chemicals and Solvents E.A. Ltd

27. Coates Brothers (E.A.) Limited

28. Coil Products (K) Limited

29. Colgate Palmolive (E.A) Ltd

30. Comet plastics limited

31. Complast Industries Limited

32. Continental Products Ltd

33. Cooper Kenya Limited

34. Cosmos Limited

35. Crown industries Limited

36. Curacid America corporation

37. Dajohn Enterprises LTD

38. Dantex Industries Limited

39. Decase Chemical (Ltd)

40. Deluxe Inks Ltd

41. Desbro Kenya Limited

42. Devki Group of Companies

43. Dodhia Packaging Limited

44. Doshi Enterprises limited

45. East African Maltings Ltd

(EAML)

46. Elex Products Ltd

47. Elgon Kenya Ltd

48. Erdemann Co. (K) Ltd

49. European Perfumes & Cosmetics

Ltd

50. Excel Chemical Ltd

51. Fibreglass and General LTD

52. Flexpac International Limited

53. Galaxy Paints & Coating Co. Ltd

54. General plastics Limited

55. Grand Paints Ltd

56. HACO Industries

57. Henkel Kenya Ltd

58. Highlands Canner Ltd

59. Imaging Solutions (K) Ltd

80

60. Infusion Kenya Limited

61. Interconsumer Products Ltd

62. Jamlack Industries LTD

63. Jamsons Industries Limited

64. Jaydees Knitting factory limited

65. Johnson Diversity East Africa

Limited

66. kachra-jivraj limited

67. Karsan Murji & Company

Limited

68. Kel Chemicals Limited

69. Kemia International Ltd

70. Ken Aluminum products limited

71. Kenapen Industries Limited

72. Kenbro Industries Ltd

73. Kenleather enterprises limited

74. Kenpoly Manufacturers LTD

75. Kenya Builders & Concrete Ltd

76. Kenya industrial plastics limited

77. Kenya Litho

78. Kenya Wine Agency Limited

79. King Plastics Industries

80. Laboratory and Allied Limited

81. Magadi Soda Company Ltd

82. Malplast industries ltd

83. Manhar Brothers Limited

84. Manson Hart Kenya Ltd

85. Maroo Polymers Ltd

86. Mars Chemical Engineers

Limited

87. Match Masters Ltd

88. Medivet products Limited

89. Meenakshi Kenya Ltd

90. Mepal plastics

91. Mibawa Suppliers Limited

92. Millenium Plastics

93. Minolta Industries LTD

94. Mitul Enterprises

95. Mombasa Cement Ltd

96. Murphy Chemical E.A Ltd

97. Nairobi bottlers limited.

98. Nairobi Plastics Ltd

99. Nas plastics company

100. Nedlex polymers

101. Novelty Manufacturing limited

102. Oasis Ltd

103. Odex Chemicals Ltd

104. Orb Energy Limited

105. Osho Chemicals Industries Ltd

106. Packaging Manufacturer Ltd

107. Palamco Enterprises

108. Pan plastics LTD

109. Paras industries Limited

110. Parit Enterprises Limited

111. Pharma Limited

112. Philips EA Limited

113. Plastic products co limited

114. Polymed East africa Limited

115. Premier Industries Limited

116. Procter & Gamble East Africa

Ltd

117. PZ Cussons Ltd

118. R & R Plastics Ltd

119. Rafiki Millers Ltd

120. RAMCO Group

121. Raneem-plastic-industries

81

122. Rayal Trading Co. Ltd

123. Reckitt Benckiser (E.A) Ltd

124. Re-Suns Spices Limited

125. Revolution Stores Co. Ltd

126. Rosavie EPZ limited

127. Rumorth East Africa Ltd

128. Sadolin Paints (E.A.) Ltd

129. Safepak

130. Sai manufacturers

131. Sameer Group

132. Samura Engineering Ltd

133. Sanpac Africa Limited

134. Sara Lee Kenya Limited

135. Saroc Ltd

136. Serafric co LTD

137. Shriji plastics limited

138. Skyplast manufacturers limited

139. Smash Industries Ltd

140. Softa Bottling Co. Ltd

141. Soilex Chemical Ltd

142. Specialised fiberglass

143. Spice World Ltd

144. Spin Knit Dairy Ltd

145. Springbox Kenya limited

146. Steam systems

147. Stewah Engineering Works

148. Strategic Industries Limited

149. Sumaria industries ltd

150. Sunny Processor Ltd

151. Sunplast Ltd

152. Supa Brite Ltd

153. Super Bakery Ltd

154. Super Foam Ltd

155. Syngenta East Africa Ltd

156. Synresins Ltd

157. Talani Plastics manufacturers

limited

158. Thermopak ltd

159. Tri-Clover Industries (K) Ltd

160. Twiga Chemical Industries

Limited

161. Twinchem

162. Unilever Kenya Ltd

163. Uni-plastics limited

164. United Chemical Industries Ltd

165. United Distillers Vintners Kenya

Ltd

166. United Traders Limited

167. Vitafoam Products Limited

168. Vitaplast Limited

169. Warren Concrete Limited

170. Wax & polypack limited

171. Wrigley Company (E.A.) Ltd

172. Image Apparels Ltd

173. Premier Knitwear Ltd

174. Alltex EPZ Ltd

175. Protex Kenya Ltd

176. Alpha Knits Limited

177. Riziki Manufacturers Ltd

178. Apex Appaels Ltd

179. Rolex Garments EPZ Ltd

180. Baraka Apparels Ltd

181. Silver Star Manufacturers Ltd

182. Bhupco Textile Mills Limited

183. Storm Apparel Manufacturers

Co. Ltd