Professional Documents
Culture Documents
PG/MBA/07/46834
Accountancy
UNIVERSITY OF NIGERIA
2008
BY
OGBU, OGBONNAYA B.
PG/MBA/07/46834
DEPARTMENT OF ACCOUNTANCY
FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA
ENUGU CAMPUS
DECEMBER 2008
CERTIFICATION
The work embodied in this project report is original and has not
been submitted in part or in full for any other diploma of this any other
university.
OGBU, OGBONNAYA B.
LPG/MBA/07/46834
(MBA) in Accountancy.
... .
DR. MRS. R.G. OKAFOR DR. MRS. R.G. OKAFOR
SUPERVISOR HEAD OF DEPARTMENT
DATE. DATE.
DEDICATION
I dedicate this work to my creator, God Almighty for His infinite
mercies and grace upon my life, and also to my beloved brothers who
ACKNOWLEDGEMENT
I am grateful to my supervisor, Dr. Regina Okafor, who at a
very short notice accepted the challenges to take over that
supervision of t his project work despite her numerous official and
domestic engagements.
I am also indebted to Mr. R.N. Ugwoke and other lecturers of
Accountancy Department and Mrs. J. N. Igwillo for their pieces
advices that made this research work and entire programme possible.
I acknowledge the assistance of staff of Nigeria Mineral Water
industries Limited, Enugu and Onitsha especially, Mrs. Ugwuaja and
Sunny Agam are the staff of pepsicola Nigeria Plc Enugu and those
of Coca-Cola Plc, Enugu. Again, I appreciate the kind assistance of
Mr. Uche Michael, the Treasurer of Ndufu Ikwo LGA who always
allows me the time whenever needed to run around for this work.
My appreciation goes to my parents and other relations who
understood my position during this time of work.
I extend my grace to my colleagues in the Department of
Accountancy, Esom Stanley, Angela, Betty, Ozotangbo Chris and
others for their personal materials and contributions which I found
quite useful for my research.
Finally, all the glory, honour and majesty should always go the
Almighty God for his gift of knowledge and protection during the
period of this programme and the research.
OGBU OGBONNAYA B.
DECEMBER, 2008
ABSTRACT
It has been generally accepted that for any organization to produce and satisfy its
stakeholders, such organization must have good management team that
manages the resources of the organization using some laid down rules. In
manufacturing concerns, inventories constitute a greater proportion of assets.
The management of inventories usually involves a lot of problems which range
from the right tome to place order to maximization of profits for the stakeholders.
Thus, the research undertaken this research work entitled. Evaluation of
usefulness of inventory management. A study of some selected Beverage
Companies including: Coca-Cola Nigeria Plc, Pepsicola Nigeria Plc and Nigeria
Mineral Water Industries Limited.
The objective of this work includes: To determine whether profit is maximized
and cost minimized due to the application of the efficient inventory management.
To determine also whether manufacturing concerns in our country manage
inventories effectively by using inventory management techniques e.g. Economic
Lot Size, Just-in-Time etc.
Data were collected using questionnaire method, and were analyzed using chi-
square (X2) Pearson product moment, correlation co-efficient (r) and regression
analysis.
The result therefore shows that they place order at the right time and right
quantity overcoming the setbacks of lead time. The companies also minimize
costs of holding inventories and maximize their profits. The findings showed that
manufacturing concerns in Nigeria meet the target requirement of their
customers, stakeholders, and the society where they operate.
The research recommends that: all staff of the manufacturing concerns should be
made to have the thorough knowledge of inventory management as this will
enable them to work towards their stock protection and cost minimization. The
manufacturing concerns should get the recent developed software on inventory
management and use to update their knowledge of inventory management on
regular bases.
TABLE OF CONTENTS
Title page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract vi
CHAPTER ONE
1.1 Introduction 1
References 15
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.0 Introduction 16
checking inventories 20
manufacturing concerns 27
management 40
management 45
References 51
CHAPTER THREE
3.0 Research methodology 53
References 62
CHAPTER FOUR
tabular costs 64
total costs 82
levels 84
CHAPTER FIVE
Bibliography 112
Appendix I 115
Appendix II 116
CHAPTER ONE
1.1 INTRODUCTION
Every Organization has to its own purpose of operation. The
and effective that organization is. But for the goals of any
objective, purpose aim or goal of its wage. And also when using the
laid down rules and resources available, achieves the best desired
firm is producing for sale and the component that make up the goods.
inventories for the purpose of achieving the best thereof? The answer
future demands and deciding when and how to order with overall
excellent.
- Sustenance of a large size of inventory for efficient and smooth
- Maximization of profit.
the firm.
follows:
them.
inventory levels that can enable them place order at the right
increase in price.
in Nigeria.
others.
(d) Ascertain whether the companies maximize their profit for the
prices.
companies?
These question will be structured in such a way that the
population.
order quantities).
2. Ho: Just-in-Time (JIT), Economic Lot Size and Quick Response
stakeholders.
(v) It will enable the manufacturing companies obtain the right size
(viii) It will provide a base for other research works that might be
operation.
manufacturing is very vast and for this reason the researcher based
this study on some selected beverage companies in Nigeria namely:
Coca-cola Nigeria PLC, Pepsi cola Nigeria Plc and Nigerian Mineral
etcetera.
1.8 LIMITATION OF THE STUDY
can refer to both the total amount of goods and the act o counting
strict order.
minimum.
2.0 INTRODUCTION
control.
demands and deciding when and how to order with the overall
sales. It is also the act of making sure that items of stock are
available when customers call for it, but not too much stock so that
and place in exactly the right amount and at the best possible price.
others.
operations.
operations in Nigeria.
(c). determination of the economic order quantity or lot size
the stakeholders.
avoiding rework and inspection that will not add direct values to the
products produced.
are still finding their grounds, its full utilization involves using the
concept (JIT) along side with other models like economic lot size. The
OF CHECKING INVENTORIES
are used in order to produce and sell to the customers the products
that they require. These material inventories are the raw materials,
finished goods. Raw materials are those basic input materials that are
products that represent product that require further job before they
operations.
plus a receipt of sale minus the actual sale to reflect the quantity at
such in which the items of inventories are not properly and actually
hard to pinpoint the inventory levels, the item that need to be ordered,
The recorder level system which is also called the two BIN
set for each item of inventory. When the stock level falls to the re-
called two BIN systems because the stock is segregated into two
bins. Stock initially drawn from the first bin and a replenishment order
issued when it becomes empty from the second bin. Most of the
inventory to check its inventory levels by using it, the maximum and
= 280 x 60 units
= 16,800 units
(ii). Minimum level = Re-order level Average usage for lead time
= 16,800 (220x(50+60/2)
= 4,700 units
= 21,800 units
inventory and the control levels each time an entry is made on the
card. The re-order level shows when stock should be replenished, the
for production different items may reach re-order level at the same
time.
stock level for all parts are reviewed at fixed intervals, for instance,
shortly after review, stock out may occur before the next review.
as follows:
minimum cost
levels, forecasting future demands and deciding when and how many
The ordering costs on the order hand are the cost of placing for
quantities of stock are ordered, the ordering cost will reduce but
Transport costs
Transportation costs
(b). extra costs associated with urgent and often small quantity
replenishment purchases.
(ELS).
MANAGEMENT
others.
inventories. The size of the order should be such which ensures the
INVENTORY MANAGEMENT
sales. The sales made are high when the customers needs are
more important than ever, and they expect better services and more
production.
Therefore, inventory management plays much role in
disrupted. The disruption hinders not only production but the level of
only tied the organization. And so, it is only through the process of
MANAGEMENT
concerns are large holding costs. At that point, liquidity which is the
most liquid asset is cash, the most liquid assets are short term
investments (bills). Debtors are fairly liquid assets as they can pay
their bills in near future. Stocks are the least liquid current assets
customers given credit period before they can be converted into cash.
quality that should be ordered at any time to reduce the capital that is
their creditors.
receivables.
REFERENCES
pattern, blue print, paradium that stipulates how the data for the
techniques.
investigation, one of the first steps in any statistical study must be the
work, and the integrity of the collections process. This made the
The data used for this study are the primary and secondary
study. Out of the nineteen, five (5) were on personal data of the
manufacturing concerns.
computed.
(Limca), Onitsha
Total 128
used thus
n= N
1+N(e)2
1 = Constant
N = 128
1+128(0.05)2
= 128
1.32
n = 97 respondents
nh = NH x n
N
organization
N = Overall population of Study
Nh1 = 45 x 97
128 1 = 34
Nh2 = 40 x 97
128 1 = 30
Nh3 = 43 x 97
128 1 = 33
(Limca), Onitsha
twelve (12) copies were not returned. The researcher was left with
eighty five (85) valid questionnaire to work with the formed the basis
for the data analysis. The method entails dividing the population into
(Limca), Onitsha
Total 97 85
the relevant questions that applied to each of the hypotheses and the
X2 = (O-E)2
E
Where X2 = Chi-Square
O = Observed frequencies
E = Expected frequencies
= Summation.
equal to the tabulated X2, hence reject the alternative hypotheses (Hi)
(ii). Reject null hypotheses (Ho) if X2 calculated is greater than or
and qualitative data collected during the field work. These data
the questionnaire and other relevant data collected from the manuals
at the end, the total scores for each class of the responses and their
RESPONDENTS
Male 22 20 18 60 70.59
Female 8 7 10 25 29.41
Total 30 27 28 85 100
20-30 14 11 12 37 43.53
31-40 8 7 6 21 24.71
41-50 3 5 4 12 14.11
51-60 3 2 3 8 9.41
60 and 2 2 3 7 8.24
above
Total 30 27 28 85 100
was of the age bracket of 20-30 years. 21 or 24.71% was of the age
was of the age bracket of 61 and above. This shows that the
energetic.
Table 4.1.3 Percentage Analysis of Educational Qualifications of
Respondents
PLC
SSCE/GCE O 10 15 9 34 40.00
Level
OND/NCE 8 5 7 20 23.53
B.Sc/HND, 7 4 10 21 24.71
M.Sc/MBA
Others
Total 30 27 28 85 100
Respondents
Personnel 4 5 6 15 17.65
official/staff
Production 8 7 9 24 28.24
officer/staff
Inventory 4 3 2 9 10.58
officer/staff
Sales 9 8 5 22 25.88
officer/staff
Accounts 5 4 6 15 17.65
officer/staff
TOTAL 30 27 28 85 100
Respondents
Junior/Intermediate 15 16 11 42 49.41
staff
Others 2 1 2 5 5.88
TOTAL 30 27 28 85 100
17.65% was the management staff while 5 or 5.88% was in the cadre
Manufacturing Concerns.
organization Agree
production
Total 75 100.0
concentrates, mea solution, sugar and water among others for their
among others.
concerns are tactically applying them with the workable ones. Such
others just like the United States of America, Japan and Britain, etc
companies Agree
Lot Size of
Economic
Order
Quantity of
Inventory to
order and
when to do
so.
83 100
used to produce the right order quantity of inventory and at the right
Cost of Inventories.
Economic Agree
minimize the
cost incurred
in inventory
procurement.
Total 84 100
concerns to maximize their profits while 16.67% was not of the same
Investments in Inventory.
the view.
Inventory Items.
Total 84 100
Strongly 24 30.86
Total 81 100
Disagree 7 8.54
Total 82 100
Disagree 7 8.54
Total 82 100
87.80% attested to the fact that suppliers of the raw materials do not
fail that the reliability needed of the servers by the clients [the
obtains.
However, some of the respondents disagreed to the above views
costs to the total cost shows that the beverage companies are using
and this resulted to reduction of the total cost which in turn helps in
PRODUCTION LEVEL
are avoided.
ORGANIZATION OF STUDY
The table above shows the levels of production and sales of the
Limca Plc]. The outputs of production show that production has been
constantly on the increase since 1998 to 2002. This shows that the
has also remained steady since 1998, for instance, in 1998, the total
difference of N5,202,755.
receive from the services rendered to them and also for the products
sold to them.
4.5. ANALYSIS OF CUSTOMER SATISFACTION THORUGH
TABLE 4.5 EOQ AND INVENTORY COS TFOR THE FIVE YEARS
PERIOD
ordering and holding cost. From the table above, using the Economic
instead of the EOQ units above, the cost of inventories could have
been higher. Therefore, the techniques of using efficient inventory
twelve and thirteen were used and these procedures were adopted
as shown below.
Ho: Just In Time [JIT], Economic Lot Size and Quick Response
Hi: Just In Time [JIT], Economic Lot Size and Quick Response
Coca-Cola Nig. 7 20 4 5 36
Plc
Plc
Limca Ltd 6 21 0 1 28
Total 20 47 9 8 84
Coca-Cola Nig. 7 20 4 5 36
Plc O
Plc O
E [4.8] [11.2] [2.1] [1.9]
Limca Ltd O 6 21 0 1 28
Total 20 47 6 8 84
shown.
X2 = (O-E)2
E
E = Expected frequency
X2 = Chi- square
= Summation
[1986:273].
df = 6 [table 4.6.1.]
X2 tab = 12.592
production.
4.6.3. HYPOTHESIS THREE TESTING
Coca-Cola Nig. 16 9 0 4 29
Plc O
Plc O
Limca Ltd O 14 12 0 6 32
Total 42 28 4 10 84
TABLE 4.6.5: OBSERVED AND EXPECTED FREQUENCIES
Total 42 28 4 10 84
Chi-square table.
verse.
by the use of economic lot size while the null hypothesis will be
rejected.
r = nxy- xy
(nX2) (X)2 (nY2) (Y)2
UNITS [000]
r = nxy- xy
(nX2) (X)2 (nY2) (Y)2
r = 347987,264.60 338152908.60
(41,688,049.50) (2,596,611.70
r = 9834456
(6456.63) (1611.40)
r = 9,834356
10,404213.58
r = 0.95(2.d.p)
Table 4.7.3. was used for this computation the formula shown below
is used.
R2 aY+bXY n(Y)2
(Y2) - n(Y)2
R2 958.12(11717.01)+0.24(69,597452.92)-5(2343.40)2
27976986.99 - 5(2,343.40)2
R2 = 27929690.32 - 27457617.80
27976986.99 27457617.80
R2 = 472072.52
519369.19
R2 = 0.91 or 91%
relationship with the use of economic lot size [X]. The remaining 9%
connecting variables together. So, that the nature and extent of their
slope of Y on X]
y = cost of inventories
Where b = nxy - XY
(nX2) - (X)2
a = Y-bx
of Y on X]
UNITS [000]
b = 347987,264.60-338152908.60
874587649.50-832899600
b = 983456
41688049.50
= 0.24
above formula
a = 2,343.40 0.24(5,772)
a = 2343.40 1385.28
a = 958.12
y = a + bx
y = 958.12 + 0.24x
handling the cost of their inventories that total cost of inventory will
value of N958.12 also shows that if the cost and EOQ are
represented on the graph, the curve will cut the y-axis at a point of
= 958.12 +360
= 1318.12
= 958.12 + 600
= 1,558.12
= 958.12 + 840
= 1,798.12
Total
3500
3000
2500
2000
1000
500
axis. The graph gives credence to the fact that efficient inventory
CHAPTER FIVE
RECOMMENDATIONS
5.1 SUMMARY OF FINDINGS
(a) The companies maximized their profits through more sales and
techniques.
management tool.
5.2 CONCLUSION
performance.
competitors.
accurate date for forecast are things of the past. This has made for
and the right quantity to order. This has helped them to overcome the
organizations.
5.3 RECOMMENDATIONS
This research work has revealed that a lot of gains accrue from
minimization.
(c) There should be adequate study and understanding of the
(d) The organizations on their own should stop being too secretive
JOURNALS
NEWSPAPERS/NEWS MAGAZINES
TEXTBOOKS
RESEARCH QUESTIONNAIRES
Nigeria.
Yours faithfully,
Ogbu Ogbonnaya B.
THIS SECTION SEEKS INFORMATION ABOUT YOU AND YOUR
COMPANY
your answer.
1. Sex of respondent
(a) Male [ ]
(b) Female [ ]
2. Age of Respondent
(a) 20 - 30 [ ]
(b) 31 40 [ ]
(c) 41 50 [ ]
(d) 51 60 [ ]
3. Educational Qualifications
(b) ND/NCE [ ]
(c) B.Sc/HND [ ]
(d) Masters Degree and Above [ ]
6. Position:
(d) Others [ ]
AGREED
Manufacturing
organization
use stock or
inventory in
their
production.
Beverage
companies
use
concentrates,
mea solution,
sugar, water
materials for
their
production.
The products
manufactured
by beverage
companies
which you
work in and
around you
include coca-
cola, 7up,
lima, Fanta,
Pepsi etc.
Manufacturing
organizations
use
techniques to
manage their
inventory
levels.
Beverage
companies
use the
technique of
Economic Lot
Size of
Economic
Order
Quantity of
Inventory to
order and
when to do
so.
The use of
Economic Lot
Size
(Economic
Order
Quantities)
minimizes the
cost income.
The use of
just-in-time
(JIT),
Economic Lot
Size (ELS)
and Quick
Response
Manufacture
(QRM) tools
of inventory
management
help
manufacturing
concerns to
minimize their
profits.
Economic Lot
Size, Just-In-
Time (JIT),
Material
Requirement
Planning
(MPR) tools
of inventory
management
assist
manufacturing
concerns to
hold
sustainable
size of
inventories for
smooth and
hitch free
production.
Inventory
management
assists
manufacturing
companies to
minimize
unnecessary
investments
in inventory.
The use of
inventory
management
makes better
the liquidity
position of
manufacturing
organizations.
Periodic and
physical
counting of
stock items in
the
warehouse
help to reduce
pilfering,
obsolesces
and
deterioration
of inventory
items.
Inventory
management
helps to
improve sales
of the
manufacturing
companies.
Customers of
manufacturing
companies
are always
happy and
satisfied when
they are
supplied what
they needed
at the right
time.
Suppliers are
always willing
to supply to
the
manufacturing
companies
the raw
materials they
use for
production at