Management Accounting Techniques and Rationalize Decision-

Making on Manufacturing Organizations in Nepal

By

Parbhat Chaudhary

Registration No: 7-3-28-22-2014

A Graduate Research Report submitted in partial fulfillment of the requirements for the
degree of

MASTER OF FINANCE AND CONTROL

At the

School of Management

Faculty of Management, Tribhuwan University, Kirtipur

2017
 Chapter I
Introduction

1.1 Background

In management accounting or managerial accounting, managers use the provisions of

accounting information in order to better inform themselves before they decide matters
within their organizations, which aids their management and performance of control
functions. Managerial accounting is the process of identifying, measuring, analyzing,
interpreting and communicating information for the pursuit of an organization's goals.
Managerial accounting includes the financial and accounting tasks required to operate a
business. Managerial accountants work within companies and organizations to direct internal
financial processes; monitor costs, sales, spending and budgets; conduct audits; identify past
trends and predict future needs; and assist company leaders with financial decisions.
Managerial accounting primarily involves completing tasks and producing reports that
inform company leadership about financial decisions related to general company operations.
Financial accounting’s central focus is informing external groups (Wikipedia, 2017).
Management accounting is presenting accounting information to the various levels of
management in order to enable it to perform its functions of planning, control and decision
making more efficiently. By conveying pertinent accounting data in time and at less cost, the
management accounting system assists management in the formulation of policy, efficient
execution of the same, control of performance and decision-making (Iyengar, 2000).

The changes that will be necessary for management accounting technique to be useful in the
21st century are different from the changes that have occurred in the past. Now a day, all
organizations are familiar with management accounting tool and technique and also they are
using quantitative (cash flow statement, ratio analysis, budgetary control, analysis, variance
analysis, fund flow analysis, standard costing etc.) and qualitative technique (TQM, TOC,
MBE, process reengineering and kaizen costing) for collecting, classifying, analysis,
summarizing and interpreting data. Management accounting tools are using as per demand of
company. As a process of this customization, some advanced quantitative as well as number
of qualitative techniques accompany with the traditional techniques, have been emerged to

1
cater the information need in decision making. A lot of management accounting information
is based on quantitative and qualitative data. This interest was initially prompted by a
perceived gap between the theory and practice of management accounting, and specially the
generally held belief that the traditional wisdom of management accounting textbooks is not
widely used in practice.

Decision making is the process of selecting a best course of action out of many available
alternatives. It is the process of identifying and defining the problems, developing alternative
solutions, evaluating them in terms of possible consequences and choosing the best solution
among them and implementing the decision effectively. Decision making is the essence of
management. It’s what managers do (or try to avoid). And all managers would like to make
good decisions because they’re judged on the outcomes of those decisions (Robbins & Mary,
2012). Similarly management accounting is the presentation of accounting information in
such a way as to assist management in the creation of policy and the day to operation of an
undertaking. Thus, it is related to the use of accounting data collection with the help of
financial accounting and cost accounting for the purpose of policy formulation, planning,
control and decision making by the management. It is not required to conform to national
accounting standards. This allows business owners to customize the management accounting
techniques as per demand of the company. As a process of this customization, some
advanced quantitative as well as number of qualitative techniques accompany with the
traditional techniques, have been emerged to cater the information need in decision making.

The changes that will be necessary for management accounting to be useful in the 21 st
century are different from the changes that have occurred in the past. In the past, the focus
has been on how can we improve what we do? The focus for the future should be how can
we make accounting information more useful for decision making (Hoque, 1991)? The last
two decades have been a period of wrenching change for many businesses and their decision
making techniques. Many managers have learned that cherished ways of doing business do
not work anymore and that major changes must be made in how organizations are managed
and in how work gets done. These changes are so great that some observers view them as a
second industrial revolution. This revolution is having a profound effect on the practice of
managerial accounting. Since the early 1980s, many companies have gone through several

2
waves of improvement programs, starting with just-in-time (JIT) and passing on to total
quality management (TQM), process reengineering and various other management programs.
When properly implemented, these improvement programs can enhance quality, reduce cost,
increase output, eliminate delays in responding to customers and ultimately increase profits
(Garrison & Noreen, 2004). Manufacturing companies has been selected for conducting this
study because manufacturing companies in Nepal are the one which most needs to implement
modern concepts and techniques of management accounting.

1.1.1 Meaning of Manufacturing Company

Wikipedia (2017) mmanufacturing is the production of merchandise for use or sale using
labor and machines tools, chemical and biological processing or formulation. The term may
refer to a range of human activity from handicraft to high tech but is most commonly applied
to industrial productions in which raw material are transformed into finished good on a large
scale. Such finished goods may be sold to other manufacturers for the production of other
more complex product such as aircraft, household appliances, furniture, sports equipment or
automobiles, sold to wholesalers who in turn sell them then sell them to end users and
consumers.

A manufacturing company is a commercial business that converts raw materials or

components into finished products. These products are intended to meet the expectations and
demands of customers.  A manufacturing corporation is a corporation engaged in the
production of some article, thing, or object, by skill or labor, out of raw material, or from
matter which has already been subjected to artificial forces, or to which something has been
added to change its natural condition. Manufacturing companies are often structured with
division of labor and task specialization, so as to efficiently carry out the large-scale
production of standardized products.

1.1.2 Management Accounting Technique

The history of accounting date back to mediaeval merchants who engaged in voyage system
of trade. However, the history of management accounting is of recent and can be traced to
industrial revolution in the 17th century. From cost accounting to management accounting
many techniques have been developed to solve management problems in enterprise.
3
Particularly, as regards production planning and its distribution. In production planning,
concept, such as marginal costing, standard costing and cost volume project analysis are used
to arrive at the best alternative for the firm. According to Lucey (2003) the principles of
marginal costing include the separation of fixed cost from variable cost which is widely used
in cost and management accounting. Meshack (2011) opined that cost volume project
analysis also known as break even analysis is an application of marginal costing which seek
to study the relationship between costs and volume and profits at different levels of activity.
According to him this can be a useful guide for short term planning and decision making by
management. A great deal of relationship exists between cost, volume and profit, an
understanding of this will help management in taking appropriate decision that benefit the
enterprise. The provision of this analysis is within the purview of cost and management
accounting.

There are many investment appraisal and evaluation techniques in management accounting.
Broadly, these techniques are classified into two; the traditional methods and the modern
methods or discounted cash flow (DCF) techniques. Under the traditional method, we have
techniques, such as accounting rate of return (ARR) and payback period. These techniques
measure the return on potential investment and how soon the cost invested will be recouped.
Using the modern method which includes net present value (NPV) and internal rate of return
(IRR), the cash flow from the investment project will be discounted to the present value.
Where the cash inflow is greater than the cash outflow, the investment is said to be
worthwhile and the reverse will be the case where the cash inflow is less than the outflow.
Another management accounting technique which is widely used in organisations is
budgeting and budgetary control system. A budget provides a focus for the organization and
the coordination of activities and facilitates control. Planning is achieved by means of a fixed
master budget, whereas control is generally exercised through the comparison of actualcost
with a flexible budget (Lucey, 2003). The role of budgeting is paramount in organisations,
whether private or public sector organisation.

The changes that will be necessary for management accounting technique to be useful in the
21st century are different from the changes that have occurred in the past. Apart from the
above mentioned techniques, there are more recent developments in management accounting

4
that aids management decision making in organisations. All organizations are familiar with
management accounting tool and technique and also they are using quantitative (cash flow
statement, ratio analysis, budgetary control, analysis, variance analysis, fund flow analysis,
standard costing etc.) and qualitative technique (TQM, TOC, MBE, process reengineering
and kaizen costing) for collecting, classifying, analysis, summarizing and interpreting data.
Management accounting tools are using as per demand of company. As a process of this
customization, some advanced quantitative as well as number of qualitative techniques
accompany with the traditional techniques, have been emerged to cater the information need
in decision making. These techniques are introduced to aid decision making by management
and boost performance of the enterprise.

1.1.3 Rationalize Decision Making

Decision making is the process of selecting a best course of action out of many available
alternatives. It is the process of identifying and defining the problems, developing alternative
solutions, evaluating them in terms of possible consequences and choosing the best solution
among them and implementing the decision effectively. Decision making is the essence of
management. It’s what managers do (or try to avoid). And all managers would like to make
good decisions because they’re judged on the outcomes of those decisions (Robbins & Mary,
2012).

Decision making is a process of choosing best alternative out of several alternatives in an

unbiased manner to maximize organization’s target. Decisions can be given in different
business environments such as: in certainty or in an uncertainty. Besides, some factors, like
complexity of the problem, numbers of alternatives, reaction to the solutions, adequacy of
data, continuity or discontinuity of data, qualitative or quantitative data can directly affect
decision-making process and selection of appropriate methods. If the decision maker has all
types of necessary information about the problem it is called deterministic problem. If there
is no information about data and results or variables are uncontrollable, in other words if
there is an uncertainty, It is called decision-making under uncertainty.

In some cases decision maker can control some variables such as numbers, quality of
products. But there are some variables that cannot be controlled such as: number of

5
competing products, their prices, government’s decisions, export quotas etc. decision maker
cannot or very little impact on these variables. In a decision-making problem there are aims
and objectives, and there are some limiting constraints to reach these goals. Obviously, this
objectives and criterions should be ranked in according to their priorities.

1.1.4 Management Accounting Technique and Rationalize Decision Making

The changes that will be necessary for management accounting to be useful in the 21 st
century are different from the changes that have occurred in the past. In the past, the focus
has been on how can we improve what we do? The focus for the future should be how can
we make accounting information more useful for decision making (Hoque, 1991)? The last
two decades have been a period of wrenching change for many businesses and their decision
making techniques. Many managers have learned that cherished ways of doing business do
not work anymore and that major changes must be made in how organizations are managed
and in how work gets done. These changes are so great that some observers view them as a
second industrial revolution. This revolution is having a profound effect on the practice of
managerial accounting. Since the early 1980s, many companies have gone through several
waves of improvement programs, starting with just-in-time (JIT) and passing on to total
quality management (TQM), process reengineering and various other management programs.
When properly implemented, these improvement programs can enhance quality, reduce cost,
increase output, eliminate delays in responding to customers and ultimately increase profits
(Garrison & Noreen, 2004).

Similarly management accounting is the presentation of accounting information in such a

way as to assist management in the creation of policy and the day to operation of an
undertaking. Thus, it is related to the use of accounting data collection with the help of
financial accounting and cost accounting for the purpose of policy formulation, planning,
control and decision making by the management. It is not required to conform to national
accounting standards. This allows business owners to customize the management accounting
techniques as per demand of the company. As a process of this customization, some
advanced quantitative as well as number of qualitative techniques accompany with the
traditional techniques, have been emerged to cater the information need in decision making.

6
1.2 Statement of the Problem

In conventional management account theory, separating fixed and variable costs helps
gathering relevant cost related information useful in short-term decision-making. All these
profit estimates were performed considering a safe business environment as the decision
maker was familiar with the environment affecting his/her decision. However, the sales level
does not depend on the decision makers will, but on the market. Therefore, the breakeven
point analysis is increasingly required in an uncertain, risky environment (Dorina & Iuliana,
2008). Mohit (2013) in this period, costing methods was created and used. Management
accounting was seen as a technical activity for the pursuit of organizational goals and was not
used to make decisions. It only was a calculating means. There was not an independent
system for management accounting and managers used information such as cost, comparison
items and financial ratios which were outputs of bookkeeping. The necessity for companies
to apply and use these techniques in a commensurate with the expected interest and the
nature of the work of each company and its strategic goals is to conduct further studies on the
methods and techniques of strategic cost accounting and strategic management accounting on
different aspects and in different economic sectors as well as different approaches in the
application and conduct studies and research on these methods and techniques (Majeed et al.,
2012). Determining the problem of basic study in an attempt to identify the management
accounting techniques as unconventional accounting methods, and whether the use of these
methods helped in improving the decision making process of the Jordanian industrial
companies, as well as to evaluate those decisions whether they were achieved balance in
performance, and whether they have contributed to maximize returns revenue from financial
measure, or contributed to the high degree of satisfaction among the shareholders in these
companies and increased customer confidence indicators in dealing with non-financial
indicators. As the management accounting methods seek to plan and take appropriate
decisions to achieve better profits for the company (Al-Sayyed, 2015) The result obtained
revealed that that the information generated by the accounting department have significant
relationship in the production and decisions of the organization and accounting information
fulfills the basic roles of cost minimization, proper allocation of scarce resources and
improvement of efficiency. The study recommends that staff and management should

7
continue to engage in seminar/ training in order to enhance their understanding on how to
generate and use accounting information for decision making (Gabriel et al., 2016).

In today’s competitive world of business, having techniques of decision making may be the
key factor in distinguishing between the loser and the winner. Using more accurate
techniques while making the decision manufacturing organizational performance make
better; and as a result, may have a greater effect on the success of a company. Nowadays
importance of managerial accounting rises day by day with techniques on rationalize decision
making. Most of the manufacturing organizations are using the several management
accounting techniques to make the rationalize decision and it also has some difficulties to
use. On the basis of this, there are some guiding questions for this study.

 What are the management accounting techniques that support rationalize decision-
making process in manufacturing organizations?
 Are there similar usages levels of different management accounting techniques in
rationalize decision making on manufacturing organization in Nepal?
 Among the identified management accounting technique which are the most
important in rationalize decision making on manufacturing organization in Nepal?
 Is there a trace of the use of management accounting techniques to rationalize
decision-making on manufacturing companies Nepal?

1.3 Objectives of the Study

General objective of this study is to evaluate the management accounting techniques and
rationalize decision making on manufacturing organization in Nepal. The specific objectives
of the study are as follows:

 To identify the necessity of management accounting techniques that is applicable on

manufacturing organization in Nepal.
 To examine the usage level of management accounting technique in rationalize
decision making.
 To identify the most important management accounting technique in rationalize
decision making.

8
  To explore the significance of management accounting techniques in rationalize
decision making.

1.4 Significance of Study

Manufacturing is the production of merchandise for use or sale using labor and machines,
tools, chemical and biological processing, or formulation. Finished goods may be sold to
other manufacturers for the production of other, more complex products, such as aircraft,
household appliances, furniture, sports equipment or automobiles, or sold to wholesalers,
who in turn sell them to retailers, who then sell them to end users and consumers. It is
evident that manufacturing organization has at the top of the agenda over the last decade
thus, constituted the majority of many organizations’ management accounting technique.
They have become worldwide phenomena and attached great importance to global modern
business. Nowadays, an increasing number of competitors are relying on global market.
Hence, designing a manufacturing organization product and expecting a good response will
be futile. This study will have significance for various parties. More importantly it will be
significant for managers and shareholders of manufacturing organization, potential entrepreneurs,
and further study.

At first look, the study will be important for management bodies and shareholders of
Nepalese manufacturing company by suggesting major factors those will influence their
decision making and the most prominent theory they have to care of as well. Moreover, it
will also enable managers to know how they have to treat such factors in order to achieve an
optimal managing decision thereby enabling to minimize an expense of organization and
maximizing their firm’s value or profit.

Secondly, this study will be significant for mangers of Nepalese organization and for
potential entrepreneurs of manufacturing company in Nepal by giving knowledge and
direction about influential management accounting technique those can affect decision
making of manufacturing organization and their implication for firms in Nepalese
manufacturing company.

9
Thirdly, this study will be used as a good reference for further studies in the future; those will
conduct their study in relation with rationalized decision making determinants in general and
in case of Nepalese manufacturing organization in particular.

1.5 Hypotheses

Al-Sayyed (2015) stated that there is impact of the use of modern management accounting
techniques to streamline decision-making in the Jordanian industrial companies. There is no
statistically significant effect of the use of management accounting methods (target costing,
Balanced Scorecard, the production system on time) in the rationalization of decision-making
in the Jordanian industrial companies. Similarly the study tested the same hypotheses in the
context of Nepal. For this study alternative hypothesis are below.

H1: There is statistically significant effect of the use of management accounting technique
and rationalize decision making on manufacturing companies in Nepal.

H2: There is significance difference in using different type of management accounting

technique and rationalize decision making on manufacturing companies in Nepal.

1.6 Limitation of the Study

There are many management accounting techniques. This study will consider same of them
only. Because of there is huge number of management accounting techniques, only usage and
importance level have been considered but what are the reasons behind it have not been
concentrated. Decision making process has own grounds environment and silence as finding
of the study cannot be generalized. If the study wills considered the qualifications of the
respondents, the finding might be different. Most of the respondents will not have clear idea
about these techniques. Few management accounting techniques only use in the
manufacturing organizations. This study lacks consideration of a good number of
management accounting techniques. The level of the qualification wills response or not. Also
merely manufacturing organization will be considered. Listed manufacturing organizations
are using management accounting techniques or not and also the level of the qualification of
them toward justification of their responses.

10
1.7 Organization of the Study

The body of this paper structured with five chapters and different sub sections with in.
Chapter I deals with Introduction parts starting with background of the study then followed
by problem statement, study objectives, significance, hypothesis, scope and limitations of the
study and finally organization of the study. Chapter II presents review of literature which
includes a discussion of theoretical as well as empirical works then end with conclusion and
knowledge gap from the literature. Chapter III discusses about data and methodologies used
by the studies to conduct multiple linear regression analysis. Chapter IV is all about data
analysis and discussion of results; whereas chapter V present conclusions and
recommendations of the study. At last bibliography and appendixes will be also including.

11
 Chapter II
Literature Review and Theoretical Framework
This chapter deals with the evidence and findings from past related studies from various
researchers. The studies and evidences were relevant for the future investigation regarding
the management accounting technique and rationalize decision-making on manufacturing
company in Nepal. In this study there reviewed some research papers, articles, books and
GRP related to study, which contributed some ideas and help in presenting of this study.

2.1 Literature Review

Management accounting is concerned with gathering and reporting internal financial

information to facilitate decision-making process. As a process of this customization, some
advanced quantitative as well as number of qualitative techniques accompany with the
traditional techniques, have been emerged to cater the information need in decision making.
This study attempts to measure the management accounting techniques in decision making of
the selected manufacturing organizations in Nepal.

Cope (1981) reviewed techniques required in colleges and universities for the use of strategic
management and corporate planning approaches. Five areas of the strategic planning process
were the most often identified: (a) the mission, (b) the role and scope of the institution, (c)
analyzing the data of internal operation, (d) analyzing the data of the external environment,
and (e) matching the institutional mission and strengths to capitalize on opportunities for
alternative formulations of policy. Among the most substantial modern roots of the concept
of corporate planning were: field theory, geopolitical theory, general system theory, concepts
and techniques of marketing, and the concepts of organizational effectiveness.

In his writing Kaplan (1983) emphasizes that evolving understanding of management

accounting should be redesigned from the production stage to the selling stage even after
selling the products, as a whole. He also suggest that there is a need for greater commitment
to understand critical factors and need of contributions from many disciplines, need to
attempt to develop non-financial measures of manufacturing performance such as quality,
measures of product leadership, manufacturing leadership, delivery performance, bringing

12
new products to the marketplace etc.. Such important changes in managerial accounting
decision making process requires better understanding of all production stages, and analyzing
them in according to the whole system. Obviously in the whole system there are many many
variables which are called multi variables. In this study, there is an absolute consensus with
Kaplan about using multi-criterion variables in managerial accounting decision making
processes and in managerial accounting courses.

Coenenberg and Schoenfeld (1990) studied on the development of managerial accounting in

Germany. Germany, as an important continental European country has influences in the
development of managerial accounting in Albania. Authors analyzed the development of
managerial accounting in Germany in several time periods such as: (1) the time before 1900,
(2) the period of early academic efforts until mid- 1930s, (3) the period of government
standardization and control until 1945, (4) the period after WWII leading up to today’s
decision-oriented management accounting. In these different time periods, they found a
paradigm change from production-function based cost theory, to cost volume relationship
and depth cost behavior analysis. The origins of modern management accounting can be
traced to the emergence of managed, hierarchical enterprises in the early nineteenth century.
The industrial revolution in the early nineteenth century resulted in the emergence factory
system that dramatically changed the productions process. This has created a new demand for
accounting information for decision making.

A quantitative approach emphasis the subjective nature of the social world and attempts to
understand it primarily from the actor’s perspective that is from the frame of reference of
those being studied (Hoque, 1991). Given the current state of understanding of how
management accounting control systems operate in the rich variety of organizational context,
the qualitative or grounded approach appears to have much to recommend it as a means of
making progress (Hoque, 1991).Some quantitative traditional measures namely cost-volume-
profit analysis, cash flow analysis, marginal costing, variance analysis, ratio analysis etc.
have been commonly used by the managers managerial decision making, but in order to
support rapidly changing technologies as well as to meet the challenges of vigorous global
competition they need to use some developed new management accounting techniques such

13
as activity-based costing; target costing; total quality management; just-in-time, process
reengineering etc. which seems to be less used in Bangladesh.

Armstrong (1993) Management tools and techniques can be applied in different areas, such
as (1) general management, (2) marketing/ ads. management, (3) operations management, (4)
financial management, (5) human resource management, (6) information technology
management, (7) management science, (8) planning and resources allocation and (9)
efficiency and effectiveness. Tools and techniques used in general management assist
managers and executives in decision-making process. Another tools used in marketing
management process are responsible for identifying and satisfying customer needs. Tools
and techniques involved in operations management aim to ensure competitive advantage in
production, distribution and project management activities. The financial management area
involves tools which provide the basis for decision-making for finance and predicting the
performance of the company. Therefore, management tools and techniques are powerful
lever which can help managers to define and develop proposed solution to the existing
problems inside the organization.

Latta and Downey (1994) examined a wide array of sophisticated problem-solving tools and
their uses in a humanizing way that involved all stakeholders in the change process.
Brainstorming, nominal group technique, and the focus group were three integrative
qualitative tools for comprehensive planning and implementation. Statistical charts, Pareto
analysis, and benchmarking were quantitative tools that simplified the allocation of
functional groups into the stages of planning and control for achieving continuous
improvement.

Freed et al. (1994) presented the results of a national survey of institutions, seeking
information about adoption of managerial techniques, specific statistical tools used, benefits,
and frustrations experienced in 414 institutions of higher education that applied Total Quality
Management (TQM). The areas that most frequently adopted the TQM philosophy of
management were top-level administration, registration, physical plant, admission, and
accounting. The statistical tools most often used were flow charts, cause-and-effect diagrams,
and nominal group processes. Improved communication and customer satisfaction were cited

14
by 65 percent of respondents as key benefits of TQM, while perceptions of TQM as a fad,
and a time consuming practice, were cited as major frustrations.

Drury (1996) management accounting is concerned with the provision of information to help
people within the organization make good decisions. Additional costs and revenue
classification can be developed to facilitate an evaluation of various alternative actions for
decision making and planning. Classification of costs and revenue are: costs and revenue
behavior in relation to volume of activity; relevant and irrelevant costs; sunk costs; avoidable
and unavoidable costs; opportunity costs; incremental and marginal costs or revenue.

Carlos (1997) the purpose of this study was to examine the status and extent to which
administrators of colleges and universities in the state of Virginia apply qualitative and
quantitative techniques of management in planning, directing, reporting, and controlling
activities for enhancing their administrative and academic decision-making capability. The
study followed guidelines of exploratory and descriptive research. Data were collected
through a questionnaire mailed to 288 administrators of twelve randomly selected colleges
and universities in Virginia. Data were analyzed using descriptive statistics and factorial
analysis of variance to describe administrators’ decision-making capability in terms of the
extent of utilization of the selected techniques. Based upon a 55 percent response rate, the
findings show that administrators have moderate knowledge about the techniques and their
extent of use is fairly low. No significant statistical differences in the degree of familiarity
and extent of use with various management techniques (qualitative and quantitative) either by
category of administrator assignment (nonacademic and academic) and by level or type of
administrator (executive and operative) was found. The most reported techniques related to
familiarity and extent of use were Brainstorming, Checklists, Benchmarking and Cost-
Benefit Analysis. Respondents positively use and perceive the value of qualitative techniques
more favorably than the quantitative techniques for decision-making. Results of this study
may be of benefit to both practitioners and academicians.

Robert and Kim (1998) has surveyed Australian manufacturing firms to identify the extent to
which they have adopted certain traditional and recently developed management accounting
practices. The findings indicate that, overall, rates of adoption of traditional management
accounting practices were higher than recently developed techniques. However, newer
15
techniques, such as activity-based costing, were more widely adopted. The evidence suggests
that the majority of large Australian firms have adopted a range of management accounting
techniques that emphasize non-financial information, and take a more strategic focus.

Waweru (1999) study examined the management accounting practices, and management
accounting techniques used by publicly quoted companies in Kenya and the type of
management accounting reports produced and the frequency of their production. The study
also explored the management accounting techniques used by these companies and the extent
of their utilization. The basic premises of the study were that the success of any business in a
competitive environment depends to a large extent, on the availability of timely and quality
information for decision making. The study was a census study of all the publicly quoted
companies in Kenya. Data was collected using a semi-structured questionnaire and analysed
using tables, proportions, averages and percentages.

Adler et al, (2000) has done a detailed examination of manufacturers' adoption and utilization
of advanced management accounting techniques as well as perceived barriers as structural
and environmental changes to implementation of new techniques by surveying 165 New
Zealand manufacturing sites.

Adler et al. (2000) conducted a survey that asked management accountants, in New Zealand
manufacturing businesses, to indicate the techniques adopted in their business. While many
studies have focused on particular techniques such as ABC or target costing, Adler et al.
provided a questionnaire that included a vast array of management accounting techniques to
provide a fuller set of response options. Respondents were asked to rank management
techniques on a five point scale “from most used to least used”. A judgment sampling
method was chosen to achieve a response rate of 19% that provided 165 completed
questionnaires. Traditional management accounting techniques, such as full costing, direct
costing and standard costing were found to be used more often than advanced management
accounting techniques, such as strategic management accounting. The study by Adler et al.
(2000) is generally consistent with the lack of adoption of advanced management accounting
techniques as stated by the Ainikkal (1993) and Hawkes et al. (2003) studies, but inconsistent
with respect to individual techniques. It was found that firms in Australia adopted ABC, and

16
cost of quality techniques and also that big firm were more likely to use modern accounting
techniques.

Joshi (2001) has done a study which examines the management accounting practices in a
sample of 60 large and medium size manufacturing companies in India. The findings reveal
that the adoption rate in India for traditional management accounting practices was higher
than for the recently developed techniques.

Cravens and Guilding (2001) the criticisms raised have carried considerable resonance, as
note that the recent past reflects something of a management accounting renaissance.
Revisions of management accounting practices have produced a variety of novel approaches
in the fields of costing, strategic investment appraisal, strategic control and performance
management. Paralleling developments at the level of individual accounting techniques the
new term “strategic management accounting” has emerged. They see the significance of
SMA to be such as to view it as a whole new discipline.

Dalabee and ALshbiel (2012) showed that there is not a significant role for accounting
information in the reduction medical services waste at the hospital. There was not any
correlation between each component of accounting information systems (human resources,
hardware and equipment, software, databases, and procedures) and the reduction of waste at
the hospital.

Kato (2003) this study see that the target cost system is a strategic tools that reduce product
costs during the life cycle, which represents a range of activities aimed at reducing the
product of high quality, which meets the needs of customers through the life-cycle costs
checked all the ideas in which they can reduce those costs in the two phases of planning and
development.

Yoshikawa et al. (2003) also known as the target cost as administrative cost of planned and
used in the initial stages of product design, so that affect product production process based on
market demands, which include a range of activities that are formulated and determined to
achieve the required cost levels, it is usually divided into stages, order to facilitate the
achievement of planned by management and financial objectives.

17
Nashar (2004) the world recently witnessed a significant growth in various organizations, is
no longer a traditional cost systems to keep pace with the those of the revolution, which led
to the emergence of consensus this technological evolution modern and sophisticated
systems, and with the increasing development cost systems, has led to the emergence of
many methods of management accounting as representing a significant development and a
way to determine the exact cost of the product, whether goods or services.

Anand et al. (2004) in their study of cost management practices in India studied the responses
furnished by 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 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 activities based cost management
(ABCM) user firms 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. The results suggest that the firms have
better insight for benchmarking and budgeting with ABC cost system yet the consistency in
their priority of budget goals is lacking unlike the firms who are using traditional costing
systems.

Hussein (2004) points to the production system in time is: "a system of production quantities
specified in the time required to face a stable demand, is built on a thorough system to
control inventory, and an effective system information, and full coordination between the
production processes on the one hand and between suppliers On the other hand, so that
supplies reach the quantities and specifications in a timely manner.

Theresa et al. (2004) the Balanced Scorecard one of contemporary management tools
provided by each of Kaplan & Norton as a concept new strategic management where this
contemporary model offers a complete solution to the weakness and uncertainty in the old
orientation administrative system, which focuses on financial performance only through the
addition of other dimensions turning the strategic plan into action and tangible results linking
goals, means and measures the level of performance required and programs Strategic Plan.

18
Mahfar and Omar (2004) stated that management accounting form an integral part of the
management process in an organization, where it provides essential information to the
business in its planning, evaluating, controlling and decision make process. It is through
management accounting that the managers get the tools for doing their functions. However,
traditional management accounting has been criticized because they merely focus on internal
process rather than dealing with external problems such as managing the competition,
generating customer value and creating competitive advantages. The rapid changes of
business environment recently into global, competitive and turbulence business environment
give significant impact to any type of corporation, either manufacturing or non-
manufacturing company, either big, medium or small company and either profit oriented or
non-profit company.

Lau (2004) one of the functions of the educational manager is to manage the limited
resources of the educational organisation. Management accounting has been used in industry
and commerce and is also seen as one of the important tools for allocating resources and
improving the efficiency and effectiveness of educational institutions. The most common
techniques used are: (1) accounting information, (2) budgeting, (3) variance analysis, (4)
decentralisation, cost/profit centre, (5) unit cost, and (6) ratio analysis. It appears that there is
a lack of systematic management accounting in Singapore educational institutions. The
research is focused on the extent of the application of the above techniques to Singapore
educational institutions and the attitudes of the senior management of these institutions
towards the effectiveness of these techniques. The study confirms that there is still a lack of
systematic management accounting systems in Singapore educational institutions, even
though there is generally a wide application of these techniques and most senior
administrators think that they are useful for their work and would like to have training in
using them.

Christian et al. (2005) had done a case study which showed Activity Based Costing (ABC)
and throughput accounting (TA) as accounting tools to “structure” technical (process)
insights in an accounting context. The case shows how working-floor insights and production
process data can be used in the computation of income statements that are relevant
managerial decision making.

19
Christian and Vergauwen (2005) has done a case study which showed Activity Based
Costing (ABC) and throughput accounting (TA) as accounting tools to “structure” technical
(process) insights in an accounting context. The case shows how working-floor insights and
production process data can be used in the computation of income statements that are
relevant managerial decision making.

Anand et al. (2005) has shown that the Balance Scorecard adoption rate is 45.28 per cent in
corporate India compared with 43.9 percent in the USA. The financial perspective has been
found to be the most important perspective followed by customers' perspective, shareholders'
perspective, internal business perspective, and learning and growth perspective in the
performance scorecard of corporate India.

Sarker and Yeshmin (2005) has focused on the application of responsibility accounting as
one of the management accounting techniques in 30 organizations. The authors have focused
on four responsibility center as cost center, revenue center, profit center and investment
center to show the accountability of the organization. This study has also revealed that the
most common technique - budget is using to evaluate the performance.

Horngren et al. (2005) this card is a tool to assess tool and strategy at the same time because
they rely four axes to evaluate the performance of the organization are: financial hub and the
center of customers and internal processes axis and the axis of growth and learning. Instead
of focusing on the financial perspective with all its importance, but it is not enough to create
a comprehensive picture of the organization.

Kaplan and Norton (2005) known Balanced Scorecard as a "tool made whereby translation
company message and strategy to the goals and standards and provides a coherent set of
ideas and principles and map holistic path for companies to keep track of translation message
in a coherent performance measures. Contribute to these standards At the completion of the
business and the development of business strategy and strategic business communication and
assist in the coordination of individual and organizational performance.

Cadez (2006) had identified 17 Strategic management accounting (SMA) techniques were
reported data from 108 large Slovenian manufacturing companies. This study had revealed
that there was a wide range of application rates for the techniques appraised: capital
20
budgeting, quality costing and competitor performance appraisal were the most widely used;
valuation of customers as assets, lifetime customer profitability analysis and life cycle
costing were the least widely used.

Cinquini and Tenucci (2006) in a study of large sized Italian firms identified the intensity of
usage among Italian companies. The following techniques were ranked highest with mean
scores above 3. Attribute costing customer accounting: strategic pricing, competitive position
monitoring, competitor performance appraisal based on published financial statements,
strategic costing and quality costing. The techniques that have mean scores below 3 were
competitor cost assessment, Target Costing, Bench marking, Value chain costing, integrated
performance measurement and life cycle costing.

Sharkar et al, (2006) has given an overview of the management accounting practices in the
listed manufacturing companies of Bangladesh. The analysis of this study has revealed that
all sectors fail to practice some newly developed techniques. They have suggested improving
and fastening the management accounting practices.

Simon (2006) has identified 17 Strategic management accounting (SMA) techniques are
reported data from 108 large Slovenian manufacturing companies. This study has revealed
that there is a wide range of application rates for the techniques appraised: capital budgeting,
quality costing and competitor performance appraisal are the most widely used; valuation of
customers as assets, lifetime customer profitability analysis and life cycle costing are the
least widely used.

Khajavi and Nazemi (2006) have found that the world-class companies should use the newest
and modern techniques in manufacturing. Flexibility in manufacturing, advanced information
technology, programming and control, sketching and product innovation, organization
structure, financial controls, bench marking, long range strategic plans, comprehensive
quality management, and personnel active partnership in business operation and business
process are considered as the main characteristics of world-class companies. In continuation,
a model will be presented, on the basis of which, management accounting system can help
these companies. In order to establish this model, activity based costing techniques, target
costing, theory of constraint, balanced scorecard, and manufacturing on time will be used.

21
Abdul and Turkmen (2006) the Balanced Scorecard measure is an administrative system
designed to help the organization to translate vision and strategy into a set of strategic goals
and measurements correlated. And that by relying on the Balanced Scorecard.

Abdel-Kader and Luther (2006) studied management accounting practices (MAP) in the food
and drinks industry in the U.K. in order to understand the level of MAP sophistication and
the factors that affect implementation of MAP in this industry. The research methodology
used in this study was a survey questionnaire sent to 650 executives of the industry. In total,
245 usable completed questionnaires were received and analyzed. Respondents were asked to
indicate the frequency of use of 38 management accounting practices (MAP) using a Likert
scale (1 indicating never and 5 indicating very often). They were also asked to assess the
importance of each technique/practice by rating these as ‘not important, moderately
important or important. The study found that as companies moved into a more uncertain
environment, the sophistication level of management accounting practices increased.
Likewise, as their power relative to customers’ diminished, companies moved up the stages
of evolution. Analysis of the management accounting practices used suggested that the
management accounting systems employed in many food and drinks companies were not
particularly sophisticated. Taking the industry as a whole, there was little evidence of
management accounting directly connected with value creation.

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
sample was stratified in two segments; ABCM user firms and Non ABCM user firms. A five
point Likert scale was used. 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 revealed that improvement of overall profitability and cost
reduction were the motivating factors for using management accounting in Indian companies.
The researcher found a positive association between the adoption of ABC and company
characteristics (e.g. degree of customization, pressure of competition, business size, and

22
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. Management accountants in 500
manufacturing firms were randomly selected from the 2004/2005 Federation of Malaysian
Manufacturers Directory. A total of 75 usable responses were received, that represented a
response rate of 15%. Respondents comprised of senior level managers, including Chief
Executive Officers, General Managers and Management Accountants. In this study, the
measures for traditional management accounting techniques (TMAT) and advanced
management accounting techniques (AMAT) were adopted from Waldron and Everett
(2004). The TMAT were represented by four techniques: full costing, standard costing, job
order costing and process costing. The AMAT comprised thirteen techniques: Activity-Based
Costing, Activity-Based Management, Target Costing, Kaizen Costing, Value Added
Accounting, Cost of Quality, Economic Value Added, Life Cycle Costing, Target Cost
Planning, Cost Modeling, Strategic Management Accounting, Throughput Accounting and
Back Flush Costing.

Wegmann (2007) has analyzed the management accounting applications which try to
improve the Activity-based Costing method. He also shows several proposals: Customer-
driven ABC, Inter organizational Cost Management, Resource Consumption Accounting and
Time-driven ABC.

Al-Omiri and Drury (2007) has conducted a paper which has been unable to establish strong
links between ABC adoption and those contextual factors that have been identified in the
literature that are conducive to the adoption of ABC systems. Results indicate that higher
levels of cost system sophistication are positively associated with the importance of cost
information, extent of use of other innovative management accounting techniques, intensity
of the competitive environment, size, extent of the use of JIT/lean production techniques and
the type of business sector.

23
Bidhan (2007) has examined the status of use of management accounting techniques in the
manufacturing enterprises of Bangladesh. It has been discovered that modern techniques like
Activity-Based Costing, Target Costing, Just-in-Time (JIT), Total Quality Management
(TQM), Process Reengineering and The Theory of Constraints (TOC) were not used in
public and private sector manufacturing enterprises but a few Multinational Corporations
(MNC) are using some of techniques like JIT and TQM. Also traditional techniques like ratio
Analysis, Standard Costing, Cash Flow Analysis were found widely used.

Askarany and Yazdifar (2007) has examined the level of association between attributes of
innovation and the diffusion of activity based-costing. The findings suggest that the relatively
low implementation of ABC across firms implies that decision makers remain unconvinced
that whether ABC's advantages over traditional accounting techniques are high enough to
pursue them to implement ABC in practice based on two surveys. The results of the first
survey, carried out in 1997 within the Plastics and Chemicals Industries Association
(PACIA) in Australia proposed the perceived advantages and disadvantages of management
accounting techniques as the most influential contextual factors influencing the
implementation of accounting changes. The findings of the second survey carried out in 2002
within industries registered with CPA Australia as well as with PACIA highlight the
significant impact of attributes (advantage/disadvantage) of innovation on decision to
implement or not management accounting innovations.

Sakurai (2008) targeted and cost is a process control and determine the total product and
proposed specific costs, which produced lead to the generation of profitability required when
the price which is expected to sell in the future, which is a cost that reduce overall production
costs throughout the product life cycle with the help of those who engineered the production
and design management tools.

Schroeder (2008) see that the concept of (JIT) indicates beyond control of the inventory to
include the whole production system, where it is the removal of all sources of waste and any
activity does not lead to added value in production, through the right product in the provision
of right place, right time. Any customized production Unlike traditional entrance which is
produced according to the specific situation (Just-In- Case) by any state of production, and

24
the availability of productive potential that must be tapped as long as they are and not
according to the demand for production on time.k

Amghar (2008) known as the production system on time as "a regular entrance to improve
the overall productivity and eliminate the sources of waste and aims to achieve production at
the lowest cost, and delivery necessary quantities of finished products required quality at a
time and place without providing or delay.

Fellman (2009) i began to target costing system recently distinct from other previous cost
systems, because the activity is not limited to cost management only, but went beyond that to
care about the process of coordination and regulation of all departments and sections of the
project, which deals with the production process since the beginning of the planning and
even up the product into the hands of the final consumer, but may exceed this stage also cares
phase and follow-up maintenance and operation of some of the products you need for that.

Eze (2009) aimed to investigate how hotels in transiting economy could improve
performance and gain competitive advantage by adopting strategic management accounting
(SMA) techniques, to achieve this objective; questionnaires were administered to accountants
and departmental managers in 3, 4, and 5 star hotels in Nigeria and about 16 SMA
techniques.

Sakurai (2008) targeted and cost is a process control and determine the total product and
proposed specific costs, which produced lead to the generation of profitability required when
the price which is expected to sell in the future, which is a cost that reduce overall production
costs throughout the product life cycle with the help of those who engineered the production
and design management tools.

Bakri (2009) the production system is known in time as the production of final goods and
delivered on time for sale, and assembly of parts in time to arrange them in the final goods,
and the purchase of raw materials in time for the manufacture of parts.

Lamminmaki (2008) conducted a study on the nature and antecedents of accounting systems
involved in hotel outsourcing decision-making and control. It appears that accounting
appraisal of outsourcing proposals rarely include long-term oriented sophisticated techniques

25
such as the discounting of future cash flows. It is conjectured that this may be because
outsourcing decisions are not conducted in the context of the formal capital budgeting
process.

Devie et al. (2008) explained that there are four types of management accountant role in an
organization, as an administrator, as a doer, as a conceptor and as an actor. A management
accountant play vital role as an administrator, if he or she does administrative or
bookkeeping tasks such as recording transaction or being a cashier. Management accountant
would be a doer if he or she run accounting system in day-to-day operational activities. The
next role is as a conceptor. A management accountant can be classify as a conceptor if he or
she has higher understanding level of accounting concept but the concept has not become
important in the organization. Finally, Devi et al. (2008) mentioned that a management
accountant can be an actor if he or she concern in strategy level or provide information to
top-level manager in doing strategic decision planning and decision making.

Baldvinsdottir (2009) described the role of a management accountant in an organization

management accountants felt differ to the non-financial managers because other managers
did not fully understand and how to use the financial information. The financial data usually
were held in accounting system department. At that period, management accountants feel that
they have to educate their non-financial managers in using the accounting information. In the
nineties, the financial data are available in all levels of business. Management accountants
worked together with other managers to find out the best for the company. Management
accountants were no longer distinguish themselves from the non-financial managers. They
consider themselves as the member of management team. In the naughtiest, the rapid changes
in Information Technology made information are available throughout organization.
Management accountants should be partners with other managers. They should work together
hand in hand in achieving corporate business strategies. Sometimes, it is rare to find an
individual within organization with the title as “management accountant”, but there is always
an individual who do the management accountant functions.

Lambert and Sponen (2009) the rapid changing of business environment recently into global,
competitive and turbulence business environment give significant impact to how people doing
their business in any type of corporation, either manufacturing or non-manufacturing company,
26
either big, medium or small company and either profit oriented or non-profit company. In today’s
rapid changes, every organization must continuously ensure its sustainability in global market.
Companies must able to compete nationally and internationally in order to sustain in the market.
Management accountings practices have to assure that information provided to managers are
relevant and useful in doing their jobs. In summary, this research is to address the management
accounting practices today in medium and big-scale manufacturing companies, the management
accountant role in the organization and the factors that drive the changing role of management
accountant. Literature foresees new management accounting techniques and changes in
organizational and business environments having a huge impact on management accountants’
roles, yet empirical evidence on fundamental shifts in these roles remain relatively scarce.

Filomena et al. (2009) the results of the study that the target cost is a clear analysis of the
four different stages in the product development environment, and all of these four stages,
and found the intent to benefit from the strategic use of the target cost. It also showed that the
target cost of the application gave a negative indication of the uncertainty in the environment,
and found indications for the application of targeted cost associated with a positive rate of
competition.

Knight and Collier (2009) the paper makes three specific contributions to the literature. First,
the dynamic capabilities literature is applied within management accounting to show how the
adoption of particular techniques in particular organizational settings can provide decision
useful information for the improvement of substantive capabilities and improvements in the
resource base. Second, a revised model of dynamic capabilities is presented which takes into
account the hierarchical and inter-related nature of resources and capabilities. The managerial
role is emphasized through the role of managers in accessing external knowledge resources,
transferring that new knowledge into new or modified organizational routines and using that
knowledge to develop substantive capabilities, thereby leveraging the use of internal
organizational resources. Dynamic capabilities must be learned and embedded within
organizational routines. These routines include management accounting routines. Third, the
literature of capability lifecycles has been expanded to reflect some additional causes of
failure of dynamic managerial capabilities.

27
Jorg (2009) investigates the role of variance analysis procedures in aligning objectives under
the condition of distorted performance measurement. A risk-neutral agency with linear
contracts is analyzed, whereby the agent receives post-contract, pre-decision information on
his productivity. If the performance measure is informative with respect to the agent’s
marginal product concerning the principal’s objective, variance investigation can alleviate
effort misallocation. These results carry over to a participative budgeting situation, but in this
case the variance investigation procedures are less demanding.

Yeshmin and Das (2009) has conducted a study on financial institutions in Bangladesh. It
revealed that managers of the financial institutions are very much satisfied in application of
budgetary control analysis and variance analysis to measure their performance among the
fourteen management accounting techniques. At the same time managers were very much
dissatisfied in application of segment reporting.

Thanju (2009) conducted a study on determinants of management accounting changes in

three private Hospitals in Nairobi during the study period. Management accounting changes
have been documented in developed countries and have been related to changes in business
environment. However, no such study had been document in private Hospitals in Kenya. This
was the gap that this research intended to fill. The objective of the study was to evaluate the
management accounting changes and determinants of these changes that occurred in these
three hospitals in Nairobi between the period of 2006 to 2011.To achieve the objectives, the
researcher used descriptive cross sectional survey design where primary data was collected
through structured questionnaires and personal interviews with financial managers/
management accountants of the respective Private hospitals. The data was analyzed using
descriptive statistics, presented in narrations, graphical and pictorial designs for interpretation
and summarization.

Abu-Zeid (2010) the study aimed to assess the traditional cost systems and ways of
developing and studying the role of the target cost system to achieve a competitive advantage
in the oil and gas manufacturing companies to enable them to survive in the global markets,
and the results showed that the distribution of costs is based on assumptions that unfair.

28
Adeyemi (2010) knew production system in the time that the system works a comprehensive
strategy combines basic tactical elements include: ((JIT purchasing and JIT)) production in
order to remove waste, and optimal use of resources throughout the series processing.

Rehana et al. (2010) had made a comparative analysis in a study where the result has focused
on the variability of management accounting practice in manufacturing and service
industries. The total variability in application of management accounting techniques in
managerial functions of manufacturing and service industries, 73.343 % and 54.396%
respectively. The findings reveal that management accounting techniques such as financial
statement analysis, budgetary control, CVP analysis, variance analysis and fund flow analysis
are common 14 both the industries and are used frequently in managerial functions.

Jawad and al-Rifai (2010) also reached to benefit the company not to do the research sample
by following the steps of the scientific decision-making process concerning the acceptance of
special order with its failure to perform differential analysis of the costs because of its role in
assisting the Director in making such decisions.

Kee (2010) the results of the study that the traditional target cost model can lead to products
that have a net present value is negative, while the same net present value is positive products
refuses, and mathematical analysis to model the traditional target cost, refers to it as a regular
feature of the model.

King et al. (2010) presents evidence linking primary healthcare business characteristics,
budgeting practices, and business performance. Based on a sample of 144 responses from a
survey of members of the Australian Association of Practice Managers (AAPM), we find that
factors identified by contingency-based research are useful for predicting a business's
budgeting practices.

Chand and Dahiya (2010) has investigated and report the importance and usage of
management accounting techniques in Indian. Based on a structured questionnaire over 429
Indian hospitality small and medium enterprises. The findings have suggested that
management accounting techniques have a great impact on different firm's aspects especially
on cost reduction and quality improvement. Further results indicate the major obstacles for

29
application of management accounting techniques in Indian SMEs relating to ownership and
size characteristics and extensive high cost.

Shil et al. (2010) in Bangladesh, the research on Cost Management Accounting Practice
(CMAP) is very rare that made the researchers interested to initiate a research in this area. It
will enlarge the scope of further researches benefiting the practitioners to come up with
feasible solutions to the problems identified in the research.

Hoozee and Bruggeman (2010) has conducted a paper which shows how collective worker
participation and leadership style influence the emergence of operational improvements
during the design process of a time-driven activity-based costing (ABC) system in a case
study setting. The case findings suggest that, for operational improvements to appear during
the design process of a time-driven ABC system, collective worker participation and
appropriate leadership styles are indispensable.

Hansen (2010) presents an analysis of the resolution of organizational externalities through

the use of non-financial performance measures for planning. Using a comparative case study,
this paper illustrates how centralized controllers choice of non-financial performance
measures and target setting in two companies provides critical information to decentralized
agents regarding how to balance their performance with the performance of other
decentralized agents in their organization.

Efendioglu and Karabulut (2010) find a link between tools such as activity- based costing,
balanced scorecard and financial performance of the Slovenian constructor sector. Find a
positive relation between change of sales growth, profit and utilization of “what if analysis”,
portfolio method (growth share matrix) and economic forecasting. Many SMTT, such as
cost-benefit analysis, activity-based costing, balanced scorecard, customer profitability
analysis etc., were proposed as tools that support organizational performance by improving
customer satisfaction and retention, increasing market share, learning the position of
company on comparison with competitors, enhancing profits.

In early research done by Naco et al. (2010) they used a sample of 150 people (Members of
Certified Accountants on Albania CAA). The focus of their study was the practices related
with traditional systems of cost accounting and new approaches used in cost accounting,
30
mainly those focused on the decision making function. They investigated the recognition use
and assessment of activity based costing (ABC). Also, target costing and the costing of
quality were introduced as tools for confronting increased competition. To find out about the
extent to which practitioners applied their costing system to provide more accurate cost
information for decision making purposes, respondents were asked to indicate how often and
how important are for them seven techniques related to costing systems. The results of the
sample investigated shows lower levels of importance and usage of ABC and other full
costing techniques. Budgeting for planning and control is either important or moderately
important for more than 83% of companies. It was interesting that a high proportion does not
flex or amend their budgets for changes in volumes or other factors, but work only with fixed
budgets. Activity based budgeting and activity based costing have higher ratings of
importance than actual usage.

Marie et al. (2010) investigated the relevance of standard costing in a study titled: Is Standard
Costing Still Used? Evidence from Turkish Automotive Industry. The objective of their study
is to find out the use of standard costing in the automotive industry, the leading
manufacturing sector of Turkey. Three survey methods were used in order to obtain the data -
electronic questionnaires, telephone and face-to face interviews .The questionnaire was sent
to all of the thirteen primary and 300 supplier companies in the automotive industry in
Turkey. The findings show an average usage rate of 77 percent for standard costing. It is
concluded that the standard costing is still used in the automotive industry in Turkey, despite
a general belief by some academicians who argue that the standard costing is out of date. The
majority of non-users are local small supplier firms. The findings of the study are similar to
the findings in Malaysia and in Dubai.

Md. Habib et al. (2010) this paper examines the underlying hypotheses of the Balanced
Scorecard (BSC) which states that improvements relating to customers, learning and growth
and internal processes improve the financial performance of an organization. In designing
current research, the study focused on leading manufacturing and service companies based in
Bangladesh and involved a structured questionnaire supported by financial data extracted
from financial reports over three years. The results show that the BSC perspectives are
positively correlated with each other at a statistically significant level and in a sequential

31
way. Results also evidence that the companies that have improved their ROE and ROA had
increased their efforts towards characteristics that involve the learning and growth
perspective. This research has shown that Bangladeshi companies that apply a BSC model
benefit from increased performance, and these findings have a number of important
implications for managers and customers and contribute to our knowledge of the BSC in
developing countries.

Fowzia (2011) Increased competition and uncertain business conditions have put significant
pressure on corporate management to make informed business decisions and maximize their
company's financial performance. In response, a range of strategic management accounting
tools and techniques has emerged. Strategic management accounting practices in the business
world have their roots in all types of enterprises. It also focuses on the influential techniques
to attain strategic effectiveness of manufacturing organizations. Findings reveal that the
overall adoption level is in between the medium and low adoption level. Except in case of
type of industry, the usage level is different regarding industry size, strategic pattern,
strategic mission and strategic positioning. It also shows that only activity based costing,
target costing and strategic costing techniques are significant to achieve strategic
effectiveness.

Joodeh et al. (2011) a study that more companies there have a clear definition of the concept
of management accounting, and that most of these companies has the separate sections or
responsible for the application of management accounting techniques people, and that the use
of management accounting methods, the companies generally weak, especially the use of
modern management accounting methods.

Farjana and Amaran (2011) had surveyed Bangladesh manufacturing firms to identify the
significance of management accounting techniques in decision making on Manufacturing
Organizations in Bangladesh, Where 74 manufacturing organizations have been surveyed.
Findings reveal that cash flow statement analysis, ratio analysis, budgetary control, CVP
analysis, variance analysis and fund flow analysis have been frequently high-ranking
techniques. Similarly 75.125 % of the total variability has found in the usage of management
accounting techniques and it is also found by using multiple regression model that only
25.6% of the variation in decision making of manufacturing organizations in Bangladesh.
32
The study by Majed (2011) under the title. The E-Commerce Impact on Improving
Accounting Information System in Jordanian Hotels, this study is aimed to determine the
effect of the electronic commerce on accounting information system development in Jordan.
The data analysis found out that accountants in Jordanian hotels have positive attitudes
towards information technology, and use internet in accounting works, they agree that hotels
depend on E- Commerce and customers get orders by using website.

Lino and Andrea (2011) had stated considering the new changing service environment, the
role of management accounting in providing information to support managerial decision
making and control can be widely renewed. The purpose of the paper is to point out a
research agenda for Management Accounting under the emergent Service-Dominant (S-D)
Logic. S-D Logic is widely discussed in the field of Marketing; the paper tries to extend S-D
Logic in the Management Accounting context and develops some related considerations.
Researcher identify several critical research questions that address a tentative research
agenda in the field of management accounting to better explore its role within service
science. Throughout the paper many different examples are provided in order to support what
is sustained. Service related change in economy and firms raises new challenging issues in
management accounting topics such as cost classification, cost structure, cost object, the role
of “traditional” accounting tools and models, price-cost relations for pricing decisions. The
conclusions of the paper trace some aspects addressed as core in the distinction between
Goods dominant accounting and service-dominant accounting. Considering the new changing
service environment, the role of management accounting in providing information to support
managerial decision making and control can be widely renewed.

Akbar and Morteza (2011) exact costing of productions and providing suitable and reliable
information or reports for economic decision- making process are the main consideration in
management accounting, meanwhile firms technological change causes the management
accounting to change which we have tested the effects of suck technological change on
management accounting change (MAC). The research method is descriptive survey and in
applied type in which researcher have utilized four hypothesis to obtain the research
objectives. The first hypotheses compare the rate of technological changes effect on
management accounting change. While the second hypothesis is used to compare the needs

33
of manufacturing firms to another costing system. Also in this research, the author has T test
for both hypothesis. The third hypothesis deals with the sameness of technological changes
item in which researcher have used Friedman test to examine it. Finally, the forth
hypothesis , to compare the sameness of technological changes effect and the rate of firms
need for other costing system by considering the firm size, researcher have applied Kruskal-
Wallis test and the research results indicate the firms tendencies to develop the management
accounting system.

Philmore and Diana (2011) this paper examines the management accounting practices in
three manufacturing companies within a public limited group company in Barbados. Semi-
structured interviews were done with a financial controller, production/operations manager
and supervisor in each company. Respondents perceived that management accounting
practices enable management to obtain relevant information for meaningful decision making.
Budgeting was used as a control tool within the planning process and for monitoring the cash
flow. The majority of management accounting practices were widely used by the sample. No
sophisticated management accounting software was used to generate information other than
the normal accounting software. Timeliness, technology, effectiveness, information needs
and an adoption of best practice were important factors influencing the choice of
management accounting practices used. Respondents perceived that the management
accounting practices employed within the three entities were very effective and contributed
to the success of the entities. It was also found that the management accounting practices
were consistent and standardised across the group.

Haider et al. (2011) when management accounting was introduced as an advanced version of
cost accounting after second world war its early advocates had claimed that it would make
accounting more useful in assisting managers in their decision making function. As the
discipline has failed to live up to the promise now strategic management accounting has been
presented as a messiah for the discipline of accounting. New promises have been made that
while the traditional management accounting failed to make use of strategic thinking and
other qualitative aspects of management the new discipline is likely to make accounting more
relevant and important for managers. The empirical evidence on successful diffusion of

34
strategic management accounting is still not overwhelming. It is therefore yet to be seen if
strategic management accounting can live up to its promise in future or not.

Hilles (2012) the study recommended that it would be better for the Palestinian companies to
apply modern techniques such as TQM, BSC, and ABC in order to improve the whole
company performance. Managers were recommended to focus in the ways that best employ
managerial accounting techniques in setting their plans, control systems, and so, increase the
quality of meaningful decision-Making in the very competitive environment as the findings
revealed. The company uses ABC model in pricing decisions as the least one in the rank of
applying managerial accounting techniques in decision-making. This might be attributed to
the complexity of ABC model, also this technique considered time consuming and costly.

Adler et al. (2012) the study concluded that the majority of companies are using a variety of
modern styles with failure to renounce the use of traditional management accounting
methods, also reached find out that the main obstacles to the adoption of modern methods
belong to private determinants of human resources for these companies.

Zahir (2012) as companies become more focused than ever on the quality of its products, and
the rating of its operations to multiple activities for more accurate cost products information,
and as a result of the various changes in the information and consumer tastes Technology has
changed the role of the administrative accountant from the traditional role of providing
information to more role effectiveness, placing within the integrated management team,
which seeks to plan and take appropriate decisions to achieve better profits for the company.

fakher (2012) as development in the areas of business led to a diversity of activities carried
out by a single company, and also led to a multiplicity of products offered, and this trend has
led to the complexity of the administrative processes of planning, organizing, directing and
controlling, as well as decision-making. Therefore, increased the importance of using modern
methods enable companies to verify the efficient use of available resources to achieve the
desired goals, and the way to it is the methods of information that will help in the search for
the best of those uses and the lowest cost of production, because the sound information
leading to sound decisions.

35
Hilles (2012) statistical analysis and hypothesis testing revealed that respondents have a good
technical knowledge in managerial accounting techniques as they have evaluated themselves,
especially budgeting and financial statement analysis; but the least one is BSC. Respondents
perceived that managerial accounting techniques are implemented in uneven degree in their
companies in performance management functions. The results supported the positive
association between respondents' managerial accounting knowledge and using it in
implementing planning, controlling, and decision-making, but the correlation coefficient
interlinked these relations is still low. Results reveal organizational size as an influential
characteristic in explaining the relative importance of planning and controlling by using
managerial accounting techniques. The study recommends that it would be better for the
Palestinian companies apply modern techniques such as TQM, BSC, and ABC in order to
improve the whole company performance. Managers are recommended to focus in the ways
that best employ managerial accounting techniques in setting their plans, control systems,
and so, increase the quality of meaningful decision-Making in the very competitive
environment as the findings revealed. The priority to gain ISO certificates is recommended.
Palestinian companies are required to recognize the ability to establish separated
management accounting departments integrated with all other departments. Also, Palestinian
capitalists are invited to establish industrial projects.

Dalabeeh and ALshbiel (2012) showed that there is not a significant role for accounting
information in the reduction medical services waste at the hospital. There was not any
correlation between each component of accounting information systems (human resources,
hardware and equipment, software, databases, and procedures) and the reduction of waste at
the hospital.

Siyanbola and Trimisiu (2012) This study is the analysis of accounting information as an aid
to management decision making. A survey research design was adopted in which fifty
workers, of a typical manufacturing company, were used and data were collected using
questionnaire. Four research hypotheses were raised and tested; while the demographic
information of the respondents were analysed using simple percentage, the hypotheses were
tested using t-test statistic at a significant level of 5%. The testing of the hypotheses revealed
that: Accounting information has effects on management decision, There is a significant

36
relationship between the perception of employees and accounting information, There is a
significant relationship between time factor and accounting information and Accounting
information has effects on the company’s performance. Studies have shown that successful
utilisation of accounting information requires a fit between three factors. First, a fit must be
achieved with dominant view in the origination or perception of the situation. Second, the
accounting system must fit when problems are normally solved, i.e. the technology of the
organisation. Finally, the accounting information must fit with the culture i.e. the norms and
value system that characterises the organisation.

Dr. Omar and Ali (2012) the study aims to identify the reality of accounting information
systems in four and five-star hotels in terms of planning, controlling and decision making.
The descriptive analytical method has been used through data collection by means of a
questionnaire distributed to various hotel accountants. After the statistical analysis of the
questionnaire, appeared several key findings most important of which are that hotels in
Jodhpur didn't use the methods of accounting information system in planning, control and
decision making processes. The study finding respectively that all grouped items have a
mean of (1.77, and 0.00), (1.85 and 0.00), (1.98 and 0.00) level of significance (p-value),
which means that these hypothesizes is rejected. Because there is no relationship between
accounting information system and planning, controlling, and decision-making in four and
five star Jodhpur Hotels. The study recommends increase the rehabilitation of the cadres and
develop the information system at Jodhpur hotels towards the efficient application of
accounting information system methods.

Rahman et al. (2012) the results of the interview session with the staff of Red Hospital (a no-
for-profit Hospital) revealed that bench marking was not considered a simple task thus
attention should be geared towards key areas that require improvement. The Purple Hospital
acknowledged that benchmarking activity is an area that is under explored since the practice
merely involves informal discussions with other hospital in Penanay Finance manager of the
hospital confirmed that the hospital made unsatisfactory attempt to understand how this
management accounting technology works and it’s useful to assist the hospital in
implementing better managerial practices. In a study of 400 Croatian large sized companies.
Ramijak and Rogosic (2012) observed that Activity based costing, Quality costing, Target

37
costing and balanced score card hence the frequency of 40%, 39.4%, 25.8% and 15.2%
respectively. And that life cycle costing and environmental costing hence the least frequency
of 9.1% and 6.1% respectively. Moreover, the result of two or more SMAT will have a
positive effect on cost control and reduction improvement.

Fisseha (2012) recognizing the importance of cost management accounting techniques to the
companys performance will help the company improve its decision making, competitiveness,
reduce its operating costs and maximize its profitability. This study attempts to measure the
significance of cost management techniques in decision making of the selected
manufacturing Privated Limited Companies (PLC) in Ethiopia. In doing so, a total of 33
manufacturing PLC have been surveyed with a structured questionnaire by using 5 point
Likert Scale measurement from different categories of manufacturing companies.
Consequently 31 questionnaires were collected at gross response rate of 94%. Findings
reveal that Budgetary Control followed by Funds Flow Analysis, Absorption Costing, ABC
Analysis, Segment Reporting, and finally Total Quality Management (TQM) have been
frequently high-ranking techniques. Secondly, the authors have recognized five factors to
calculate the variability in decision-making with the help of rotated component matrix which
shows that 68.26% of the total variability has found in the usage of cost management
techniques. Finally, it is also found that by using multiple regression model only 25.9% of
the variation in decision making of manufacturing PLC is explained by the 21 independent
variables. So, manufacturing private limited companies have to think about production at
lowest possible cost. On these circumstances, using only traditional cost and management
accounting techniques are not giving the fruitful result to response to the keen competition.
Management has to realize also the need for adopting the modern techniques and methods of
cost management accounting techniques to evaluate outcomes associated with their
operations and various problems, such as, asset utilization management, operating at reduce
cost, improve profitability and optimizing the value/wealth of the firm.

Salawu et al. (2012) did a survey of Activity Based Costing Adoption Among Manufacturing
Companies in Nigeria. The study reveals that inability of the traditional cost systems to
provide relevant cost was the most highly ranked reason in their decision to adopt ABC.
Traditional methods of allocating overhead were therefore believed to be deficient in terms

38
of improving global competitiveness. Also, 60% of the respondents have adopted ABC due
to increased ranges of products, competition and increased overhead. Familiarity with and
adoption of ABC was found to be across the manufacturing, more than half of the sample are
familiar with it. The 40% of respondents who have not adopted ABC cited the cost and
complexity involved with implementation as the main reason in non-adoption. However, cost
of implementing ABC was enormous which hinder the small scale manufacturing from
adopting it. This result may reflect the fact that larger firms are more likely to have the
diverse mix of products or services that makes the use of ABC advantages. Consequently, the
study recommends that the companies who have not adopted ABC because of its high cost of
implementation should endeavor to consider its adoption because in the long run the benefits
derive from it will outweigh its cost. It helps to identify inefficient products, departments and
activities and helps to allocate more resources on profitable products. In conclusion, the
senior management should also give their utmost support to the implementation and success
of ABC.

Christina (2013) the rapid changing of business environment lately is significantly changing
the management accounting practices and the role of management accountant in an
organization. The main focus of management accounting has always been to improve the
organization performance and profitability by providing relevant information for planning,
controlling and decision making. The research’s samples are 46 manufacturing companies
throughout Jogyakarta, that consist of 30 medium-scale companies and 16 big-scale
companies. The research also tries to measure whether the management accounting practices,
the role of management accountant and the factors driving the changes are different between
the two groups. By using two variables in measuring the management accounting practices,
the result indicated that Budgeting was consider the most important managerial tools in
management accounting practices for both medium and big-scale companies. However, there
was a significantly difference in management accounting task. The most important task for
management accounting for medium scale-companies was increasing profit (83.3%) but
preparing the budget was for big-scale ones (93,8%). We can conclude that, in general, the
management accounting practices were still on traditional perspectives.

39
Mohit (2013) in this period, costing methods was created and used. Management accounting
was seen as a technical activity for the pursuit of organizational goals and was not used to
make decisions. It only was a calculating means. There was not an independent system for
management accounting and managers used information such as cost, comparison items and
financial ratios which were outputs of bookkeeping.

Nadim (2013) the Balanced Scorecard is a strategic management accounting methods and the
first regular work tried to design a performance appraisal system established cares to
translate strategy into specific objectives and standards and criteria and targeted initiatives
for continuous improvement. It also unites all the scales used by the facility. Where this
method from other methods of control features and performance in a combination of
financial performance metrics and non-financial performance measures that are characterized
by easily traced and linked to the strategy of establishment. Finally concluded experimental
study in the royal Jordanian airline to the existence of the effect of the application and use of
the four balanced performance card axes based on the performance measures on accounting
profit in the airline royal Jordanian airlines company.

Adebayo et al. (2013) this study tends to critically examine the impact of accounting
information system in assisting organizations in making sound and effective decision. The
major source of data to this research is primary data through the administration of
questionnaires. Regression analysis and Karl Pearson’s correlation was used for the data
analysis. The findings show that accounting information system is an indispensable tool in
decision making in today’s turbulent world. Organizations are however, advised to invest on
information technology tools as it improve their efficiency, effectiveness and their overall
performance.

Saleemi (2013) the provision of information required by management for such purposes such
as: formulation of policies, planning and controlling the activities of the enterprise, decision
taking on alternative course of actions, disclosure to those external to the entity, disclosure to
employees, and safeguarding assets. Management of a manufacturing enterprise needs to
prepare not only financial budgets but also production budgets on weekly, daily, and hourly
bases and plans for purchase for manpower hours.

40
Md. Hafij et al. (2014) accounting information is a part and parcel of today’s life which is
necessary to understand the accurate financial situation of the organization and used as the
basis of making strategic decisions. Since strategic decisions have long-term effect on the
business and therefore it is important to analyze accounting information for making long-
term strategic decisions. The present study is an endeavor to evaluate the usage of accounting
information by the decision makers in practices in strategic decision areas. Five strategic
decision areas such as basic strategic decision, manufacturing decision, human resource
decision, long term investment decision and marketing decision were considered for the
study. The results of the study prove that there is significant relationship between accounting
information and strategic decisions and strategic decisions in all the selected areas
significantly depend on accounting information and it is also observed from the analysis of
the opinion of the respondents that 44.44% of the respondents always use accounting
information in making strategic decision in manufacturing industries in Bangladesh.

Wisner et al. (2014) inventory management involves balance between customer service, or
product availability, and cost of inventory. There are a number of factors that influence
inventory decision-making. In this paper, only two will be considered: the cost factor and the
uncertainty factor, which includes demand uncertainty and time uncertainty.

Indiatsu et al. (2014) in the literature we can find numerous findings focused on the
relationship between strategic planning and performance and only few studies regarding the
relations between strategic management tools and techniques and organizational
performance. In other words, despite the number studies about management tools and
techniques, there is just a little empirical support on this relationship. It should be noted that
studies, which examine the relationship between strategic management tools and techniques
and performance remain uncertain. Some of the studies have argued that utilization of
management tools and techniques influences organizational performance.

Egbunike et al. (2014) provided a case study of SMA application with specific reference to
benchmarking practice on three private hospitals located in the Northern region of Peninsula
Malaysian namely Orange Hospital, Red Hospital and Purple Hospital. The study shows that
Orange Hospital adopts both internal and external benchmarking techniques, pricing, costing
policy, procedures and standard operating procedures were used in the hospital
41
benchmarking process. All these areas were benchmarked with other internal and external
counterparts to achieve standard practices and coordination among all group members.

Al-Sayyed (2015) the research found the presence of the impact of the use of management
accounting methods (target costing, Balanced Scorecard, the production system on time) to
streamline decision making in the Jordanian industrial companies. In light of the results
researcher made a number of recommendations including such as the Jordanian industrial
companies, including the use of modern management accounting methods, and their areas of
interest different, in order to be able to interact and respond to environmental, social and
economic variables.

Afonina (2015) the purpose of this study is to investigate the current level of strategic
management tools and techniques utilization as well as to explore and identify the impact of
management tools on organizational performance in the Czech Republic. The research paper
is based on a questionnaire survey obtained from the 91 companies. This paper is one of the
few studies which investigate the relationship between management tools and techniques and
organizational performance. The findings show the level of management tools utilization and
possibilities influencing performance. The study indicates that there is a positive significant
relationship between management tools and techniques utilization and organizational
performance.

Shah (2015) during the past two decades, conventional cost and management accounting
practices have been under extensive criticism for their malfunction to instigate change and
their inability to support management accounting innovations in coping with the
requirements of a changing environment. The academic literature has been crucial of
conventional management accounting systems particularly for their lack of efficiency and
capability to present comprehensive and the latest information and to assure decision makers
and potential users of such information. Focusing on this debate, current study reviews the
evolution of cost and management accounting innovations over the past century around the
world and to examine whether there has been a significant impact of management accounting
in the organization. The analyses suggest that management accounting is changing. However,
these changes do not have much bearing upon the type of management accounting

42
techniques. Rather they focus on the manner through which management accounting is being
used.

Ware (2015) kinapharma belongs to Mr Kofi Nsiah-Poku a pharmacist, former pharmacy

lecturer, WHO Consultant and Industrialist .For being a successful organisation, it is not only
necessary to make decisions, but to implement the right ones. Kinapharma Limited present
success, as shown in itsleading position, canbe led back among other things to a number of
beneficial decisions. A decision is concerned with the selection of an action often out of a
number of alternatives. In order to choose the right one, decision-makers need some
guidance, which is partially provided by information gathered by management accounting.
Tools used in the management accounting area are consequently considered as a helpful
support. Also Kinapharma Limited focuses on some of these tools, including the costing
system, profitability, Costing tools and budgeting, which will be presented in this project.
The costing system contributes to the available knowledge of costs, building the basis for
several decisions, like determining prices. Profitability is used especially for decisions
concerning discontinuing operations, whereas budgeting deals with the evaluation of
investments.

Achimugu and Ocheni (2015) Accounting has wider applications in organisations.

Management accounting has wider scope but with limited applications in organisations. It is
particularly concerned with decision areas, especially effective, efficient and economic
decisions that affect the performance of the system. This important aspect of accounting is
mostly adopted in private sector organization and with little usage in the public sector,
especially the core public sector of the economy. The study reviews the application of
management accounting techniques in the public sector of the Nigeria economy. Direct
observation was used on the activities and performance of management of the Federal
Polytechnic, Idah. It was discovered that these techniques are not applied in the public sector
organisations as they are more concern with the welfare effects of their actions rather than
the profit/benefit or value generation from their actions. The paper recommends that public
sector organisations should adopt the application of the technique to suit the purpose for
which they were established, especially in reducing wastes in management of public
expenditures in Nigeria.

43
Moradi and Eskandar (2016) decision making process requires information. Accounting is
the most important source of information. In 1998, the international federation of accountants
issued a statement about the scope and using of accounting. It identified 4 stages for using
accounting information: cost determination, planning and financial control, reduction of
resources waste and creation the value. This study was designed to provide insights into
using accounting information in managerial decision making. Using the IFAC classification,
this study investigated evolution stage of using accounting information in hospitals. The
study population consisted of financial employees working at the hospitals located in Tehran
(Iran). The study sample consisted of 54 private hospitals and 82 public hospitals. The
instrument of data collection was questionnaire. Results showed that hospitals managers
don’t use accounting information to reduce resources waste and create the value. Maybe, it is
because of little familiarity with accounting in hospitals. Private hospitals managers use
accounting information to planning and control. However, Public hospitals managers only
use accounting information to determine the services cost. Findings showed that public
hospitals managers use accounting information less than private accounting. Maybe, it is
because of less accountability and using governmental resources in public hospitals.

Solomon and Gabriel (2016) the study examined the impact of Accounting information and
the performance of selected organizations in Rivers State, Nigeria. The study covers Genesis
Group Nigeria Limited, Transcorp Hotels Plc, Seplat Petroleum Development Company,
Orwell International Oil and Gas Limited, and Total Nigeria Limited all in Port- Harcourt,
Rivers State, Nigeria. The data was obtained from primary source. The statistical method
used was non-parametric test using Statistical Package for Social Science (SPSS 20.0). The
result revealed obtained revealed that that the information generated by the accounting
department have significant relationship in the production and decisions of the organization
and Accounting information fulfills the basic roles of cost minimization, proper allocation of
scarce resources and improvement of efficiency. The study recommends that staff and
management should continue to engage in seminar/ training in order to enhance their
understanding on how to generate and use accounting information for decision making.

Mohammed (2016) management accounting techniques provide financial and non-financial

information to make precise decisions. There is no accounting standard for any management

44
accounting techniques, therefore accountants use same management accounting techniques
differently in the decision making process. Researcher’s effort is to see the influence of
management accounting techniques in the process of decision makings of 205 Accountants in
Sri Lanka. A structured questionnaire was used for this purpose. The researcher uses multiple
regression analysis and means score analysis for the study. The multiple regression analysis
indicates that there is a significant impact on decision making process by using management
accounting techniques. (R2 =.368, P= 0.000) Accountant in Sri Lanka mostly uses
Budgetary Control in the decision making process and further , Ratio Analysis, CVP
Analysis, Cash Flow Statement and Target Costing and TQM also make high contribution in
the decision making process. The study helped to understand the researcher in importance of
management accounting techniques in the decision making process.

Ojua (2016) the primary objective of this study was to review the extent of application of
Strategic Management Accounting Practices (SMAP) by local Nigerian manufacturing
enterprises in the making of effective decisions by business managers and accountants. Using
a sample of 10 manufacturing enterprises, 50 professional accountants and business
managers working in the organizations were used in this study. In addition, questionnaires
were used for gathering primary data. The Pearson Product Moment Correlation Coefficient
and multiple regression analysis were adopted as the main statistical tools for this analysis.
The first hypothesis shows a ranking of -0.58 which is less than 0.5 level of confidence. On
the other hand, the second hypothesis shows that the sampled enterprises were hindered by
inherent barriers in utilizing the benefits of SMAP resulting in the p value of 0.061 which is
greater than 0.05. The results of this study indicated significant disapproval of SMAP among
professionals working in indigenous manufacturing enterprises. The findings of the study
may have implications on the management staff and accountant of the enterprise. Thus, this
is because they revealed the below average knowledge of the workings of SMAP. As a result
of this research, one is able to conclude on the need for managers to employ SMAP to enable
them identify, accumulate, and manage the costs of their activities to ensure accuracy in their
decisions making.

Mustafa and Erald (2016) accounting is the information system that measures business
activity, processes the data into reports, and communicates the results to decision makers.

45
Managerial accounting provides proper ways to understand the activities of companies
particularly have manufacturing activities. It helps the managers and the owners of
companies to get a better view of the financial data of the company. This paper aims to
identify the managerial accounting techniques used in the manufacturing companies in
Albania. In order to collect data, semi structured interviews have been done in major
manufacturing companies in the main industrialized areas of Albania. The paper is divided
into four chapters. First chapter presents an overview of some basics of managerial
accounting. Following chapter discusses techniques of managerial accounting in decision
making process that are subject in decision making process of manufacturing companies in
Albania. In chapter three, the degree and level of awareness of managerial accounting
techniques used by Albanian manufacturing companies are discussed.

Nasieku and Oluyinka (2016) virtually all techniques that are appropriate for manufacturing
companies are also appropriate for service companies. However, the most common
techniques in manufacturing companies include Just in Time (JIT), Activity Based Costing
(ABC), Target Costing, Life Cycle Costing, Throughput Accounting and Kaizen costing
while Activity Based Costing is the most commonly used technique in Service sector.
However, Activity Based Costing, Budgetary, Control, Cost Volume profit analysis, and
standard costing are common to both manufacturing and service sectors. In contrast to the
postulations of many academic authors that the traditional techniques have lost relevance and
should be discontinued, this review shows that traditional techniques including the heavily
criticized Standard Costing, Absorption Costing and Marginal Costing were still used
frequently by many companies within the last decade. The modern costing techniques used
frequently within last decades include; Just in Time principle, Activity Based Costing, Target
Costing, Life Cycle Costing , Kaizen Costing and Throughput Accounting. The usage of the
techniques depends on the situation on the ground, that is, the level of technological
advancement, the size of the company, organizational culture and stage of the product.

Khondoker (2016) the core of any organization is accounting information, through which
organizations become able to understand the financial situation of the business and they uses
this accounting information from integration system as a basis for making strategic decisions.
Since premeditated decisions have long term effect on the business and therefore it is

46
important to analyze information from accounting information system for making long-term
planned decisions. This study aiming to find out the impact of accounting information system
as a strategic decision making tool focusing on the banking sector of Bangladesh. After
conducting a questionnaire survey among 40 different private and public banks from
Bangladesh, result shows that out of total respondent 72.5% are using this tool frequently on
their Bank. I believe that this study will be able to find out importance of accounting
information system as a strategic decision making tool in banks from developing countries.
And this study will be helpful for the other developing countries banks if they are planning
for implementing accounting information system as a decision making tool.

Dr. Kariyawasam (2016) this study analyses the relationship between accounting information
and strategic decision making in the Sri Lankan manufacturing sector, specifically the
relationship between accounting information and manufacturing and marketing related
strategic decision making of companies operating in Sri Lanka’s manufacturing sector.
Sample for the study consisted of 70 public quoted manufacturing companies operating in the
country. The unit of analysis for this research was at company level. Primary data for the
study were collected via a questionnaire survey which was conducted with the Chief
Executives Officers of the selected manufacturing organizations. The relationship between
accounting information and marketing and manufacturing related strategic decision making
was analysed using Pearson’s Correlation. Findings from the study indicated that accounting
information has a statistically significant strong positive correlation with both marketing
related strategic decision making and manufacturing related strategic decision making of
companies operating in Sri Lanka’s manufacturing sector.

Dr. Cengiz (2016) decision making is comparatively simple process when the criterions are
limited and certain however this process might be quite difficult when the criterions are more
and fuzzy. Traditionally, subjects of managerial accounting include decision making methods
and mechanisms where the number of criterions are limed under the 'Ceteris Paribus'
assumption, and more obvious theoretical samples are examined to explain the decision
making process. However, in the real life number of criterions that influence the decision
making process are unlimited, there are many criterions: multi-criterions and some of those
criterions are linguistic. Managerial accounting decision making process usually neglects

47
these criterions. That is why it is believed that multi-criterions and linguistic variables should
be included to the managerial accounting decision making process. Today’s competitive
environment makes it a necessity rather than a luxury, where without efficient decision
making capabilities it isvery difficult to survive. This study suggests multi-criterion models,
especially TOPSIS, can be and should be used in managerial accounting decision making to
enhance the managerial accounting courses and decision makers’ capabilities.

Charles et al. (2016) the present study was conducted to determine whether the use of
strategic management Accounting Techniques (SMAT) is capable of providing Managers
with information for sustainability in corporate governance. A survey was carried out using a
well-structured questionnaire with questions on five point Likert format. The questionnaire
was administered on one hundred and five Management staff specialized in Accounting and
management related disciplines across product sector organizations. Primary data was
gathered from the one hundred and five respondents and multiple regression technique was
used for analysis. Our findings revealed the need for managers to employ strategic
management accounting techniques (SMAT) to enable them identify, accumulate and
manage social and environment costs of their activities for good corporate governance in
Nigeria

Shen et al. (2017) in this paper, we focus on inventory management in a manufacturing

company in China. This study aims to identify the key factors that influence inventory
management practices, investigate efficient and effective inventory management approaches,
and examine the impact of supplier cooperation on supply chain improvement. A case study
approach is used to identify the key factors that influence inventory management in a factory.
Efficient and effective inventory management practices are derived from the case study and
may provide practical guidance for foreign manufacturers in China. This study provides a
valuable tool for identifying the key factors in inventory management which can be applied
to similar problems encountered in actual manufactories.

Table 1: Review of literatures

Study Objective Findings and Conclusion

Using Important To evaluate the satisfaction ABC adopters are satisfied
48
Performance Analysis to of ABC adopters in with the costing system but
Evaluate the Satisfaction of Morocco they have not fully
ABC Adopters in Morocco benefited from the
(Charafa & Rahmouni, contribution of ABC.
2014).
The traditional Versus To evaluate the role and Management accounting
contemporary management usage of traditional and practices, particularly, the
accounting practices and contemporary management traditional management
their Role and Usage across Accounting practices across accounting practices such as
Business Life Cycle Stages business life cycle stages costing practices, budgeting
in Pakistani Financial practices are widely used
Sector (Ahmad et al., 2002)
The adoption of some To find out the adoption The is a reasonable level of
recent cost management status of recent cost awareness and adoption of
tools and their perceived management tools and their Just –in-Time
effectson the performance perceived benefits Manufacturing , and JIT
of Jordan manufacturing inventory, Activity Based
companies (Saaydah & Costing, Target Costing and
Khatatneh, 2014). Kaizen Costing in their
order of intensity.
Is Standard Costing Still The objective of their study The findings show an
Used? Evidence from is to find out the use of average usage rate of 77
Turkish Automotive standard costing in the percent for standard costing.
Industry (Badem et al., automotive industry, the It is concluded that the
2013). leading manufacturing standard costing is still used
sector of Turkey. in the automotive industry
in Turkey, despite a general
belief by some
academicians who argue
that the standard costing is
out of date.
Adoption of Modern To find out the adoption modern costing techniques
Management Accounting rate of modern costing such as target costing,
Techniques in Small and techniques in SMEs in Activity based costing
Medium (SMEs) in Developing counties. (ABC), Just in Time
Developing Countries: A method (JIT) as well as
Case Study of SMEs in other non conventional
Kenya (Karanja et al., methods were adopted as an
2012). attempt to enhance
enterprise efficiency and
innovation for better
planning and improved
product/service pricing.
Application of Activity To know the applicability ABC/M information,
49
 Based Cost and of Activity Based Cost and supports business strategy
Management to Support Management to Support in areas such as cost
Competitive Strategy in Competitive Strategy in the visibility, activity analysis,
the Banking Sector of Banking Sector process reengineering,
South Africa (Ddmingd, accurate cost information,
2007). improved pricing on
products and services,
reliable management
reporting for proactive
decision-making, life-cycle
costing of products and
service and profitability
Technological To find out Technological Cost and management
Innovation, Activity Innovation and the accounting changes lag
Based Costing and satisfaction of ABC by its behind technological
Satisfaction (Askarany, Adopters changes in manufacturing
2006). practices. There was no
perceived difference
between the responses of
firms employing ABC and
those which do not in terms
of the level of satisfaction.
Contemporary To find out the The old techniques are still
Management Accounting Management Accounting being used alongside the
Practices in UK Practices in UK. contemporary techniques.
manufacturing (Dugdale
et al., 2005).
Application of To find out the applicability They found out those
Management Accounting of Management Accounting modern techniques are not
Techniques in Decision Techniques in decision used in public and private
Making in the making. sector manufacturing
Manufacturing Business enterprises but a few
Firms in Bangladesh multinational corporations
(Ahmad et al.,2002). use them.

2.2 Summary of Literature Review

This chapter has presented a review of literature. The chapter has reviewed the contingency
theory of management accounting. The chapter has also reviewed findings of various
scholars in relation to management accounting technique, practice, system and rationalize
decision making. The changing role of management accounting techiques has also been
reviewed as well as the methods of management accounting. The previous researchers on the
50
area on management accounting techniques identified key issues that reflected that it occurs
as result of different factors affecting the organizations.

Most of these factors cut across the industries but a number of them are unique to the specific
industries. For instance, Waweru et al. (2004) suggested research on contribution of these
management accounting techniques/ tools/ methodsto overall success of the firm. Dimaggio
and Powell (1991) suggested that some organization copy and imitate others to conform to
institutionalized practices. There is also concern of utilization of management accounting
information by management to make decision. From the review, it is clear that the debate on
the practice of management accounting techniques is still ongoing and there is therefore need
to study the effects of management accounting techniques on financial performance of
manufacturing companies in Nepal.

2.3 Conceptual Framework

Manufacturing have different type of management accounting technique to take decision

making based on management accounting techniques as well as purpose of decision making
on manufacturing organization. Moreover in recent years, manufacturing companies have
taken initiative to improve company’s management. While seeing the mobilization of
resources by the manufacturing industry in the recent years, it appears that the management
team has gained confidence in the industry. Hence an attempt was made to evaluate the
growth and performance of manufacturing industry in Nepal. In fact, manufacturing industry
has designed an extensive range of management accounting technique to meet the diverse
needs of a multitude of management.

Farjana and Amaran (2011) Identified 23 variables were classified under three heads as
quantitative management accounting techniques, qualitative management accounting
techniques and both qualitative & quantitative management accounting techniques. Rehana
(2010) was tested 14 variables, Sayyed (2015) Identified 3 variables as target costing,
balanced scorecard and the production system on time. Likewise Sunarni (2013), Hafij et al.
(2014), Mohammad and Hoda (2016) conducted the study on significance of management
accounting technique in decision making of manufacturing industry with the respect to the

51
management accounting technique. So, the present study derive theoretical framework as
follows.

Independent variables
Quantitative management accounting Dependent variable
techniques Rationalize decision
Qualitative management accounting making
techniques
Both qualitative & quantitative
management accounting techniques

Figure 2.1: Conceptual framework for this study

2.4 Research Gap

Research gap represents contradiction in literature that literatures result and research
objectives, this study observed that many researchers have studied different management
accounting technique for decision making in manufacturing organization. Some researcher
views such as the study founded there were contradictions in management accounting theory
and management accounting practice and specially the generally held belief that the traditional
wisdom of management accounting textbooks is not widely used in practice (Cooper et al.,
1983), (Berry, 1984), (Wilkinson, 1986), and (Ouibrahim & Scapens, 1988). Some quantitative
traditional measures namely cost-volume-profit analysis, cash flow analysis, marginal costing,
variance analysis, ratio analysis etc. have been commonly used by the managers managerial
decision making, but in order to support rapidly changing technologies as well as to meet the
challenges of vigorous global competition they need to use some developed new management

52
accounting techniques such as activity-based costing; target costing; total quality management;
just-in-time, process reengineering etc. (Hoque, 1991). The manufacturing business firm’s
concerned personnel attitude towards the use of management accounting techniques in decision
making as they play the critical role in creating a competitive advantage for the organizations.
The findings reveal that the adoption rate in India for traditional management accounting
practices was higher than for the recently developed techniques (Robert & smith, 1998), (Joshi,
2000). The financial perspective has been found to be the most important perspective followed
by customers' perspective, shareholders' perspective, internal business perspective, and learning
and growth perspective in the performance scorecard of corporate (Anand et al., 2005). Above
the literature, there are taken management accountings tools and as they are quantitative and
qualitative techniques for decision making of Nepalese manufacturing organization. Hence, this
study is needed to identify the necessity of management accounting techniques that is
applicable, examine the usage level of management accounting technique in decision
making, and explore the significance of management accounting techniques in decision
making of Nepalese manufacturing organization.

53
 Chapter III
Research Methods
This chapter consists of research strategies, methodology, and designs used in this study are
described in this chapter. Discussions begin with the research design, population and sample,
nature and source of data and model, and this is followed by the research purpose.
Furthermore, the validity and reliability of the study is involved in this chapter.

3.1 Research Design

The study design for the study is basically descriptive and analytical. Descriptive research
design is describing the state of affair, phenomena and situation as it exists at present. And
the analytical research design is used to test one or more specific hypotheses, typically
whether a significant of management accounting techniques in decision-making, data
obtained in an analytic study can also be explored in a descriptive mode, and data obtained in
a descriptive study are analyzed to test hypotheses. The basic methodology has used in the
study is questionnaire survey.

3.2 Population and Sample

The population of the study is manufacturing industry in Nepal. Manufacturing industries are
2584, as different sectors manufacturing industries had currently used management
accounting technique for decision making (Industry, 2017). So this study takes total
population as a total number of manufacturing companies in Nepal. And sample size of this
study is 18 listed manufacturing companies as per NEPSE in 2017.

3.3 Data Source and Collection Methods

The data needed for this study is gathered mainly from primary data. In gathering, primary
data is collected by using structured survey questionnaire. The primary data has collected
from the Account department and top management of the listed companies. The required
primary data is collected based on 5 point likert measurement scale (where 1 represents
always, 2 represents frequently, 3 represents sometimes, 4 represents rarely and 5 represents
never) to each individual (senior officers of management level) of the manufacturing

54
organization. Those who are responding on the questionnaire has taken as a sample of the
study. For literature review and other purposes, different books, articles, manuals, websites
and other secondary data has reviewed.

3.4 Statistical Tools

The collected data is sorted, classified,tabulated, and analyzed using statistical tools like
descriptive survey statistics, factor analysis, multiple regression model and correlation
analysis.

3.5 Method of Data Analysis

In this study the authors has used these statistical techniques to represent the significance of
management accounting techniques in decision making.

Pie charts: in other to present the management accounting technique of respondent.

Mean score: has used to measure the relative significance of the management accounting
techniques.

Factor Analysis: has conducted to measure the variability of the Management Accounting
Techniques in decision making.

Multiple regression models: have applied to measure the significant influence of the
management accounting techniques in decision-making.

Cronbach alpha: to measure internal consistency (reliability) of the data cronbach alpha test
have employed.

3.6 Software Used

The data obtained from the questionnaire response is analyzed using SPSS 20 software and
result thus obtained is analyzed, interpreted and written by used MS-word.

55
3.7 Test Validity and Reliability

Content validity is established by the study using pre testing of questionnaire as a tool among
the 33 Master level student of finance background. Reliability of the measures is assessed
with the use of Cronbach’s alpha. Cronbach’s alpha allows us to measure the reliability of the
different categories. It consists of estimates of how much variation in scores of different
variables is attributable to chance or random errors (Selltzm et al., 1976). As a general rule, a
coefficient greater than or equal to 0.5 will be considered acceptable and a good indication of
construct reliability (Nunnally, 1978).

56
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 Table of Contents

Chapter I Introduction..........................................................................................................1

1.1 Background......................................................................................................................1

1.1.1 Meaning of Manufacturing Company..........................................................................3

1.1.2 Management Accounting Technique............................................................................3

1.1.3 Rationalize Decision Making.......................................................................................5

1.1.4 Management Accounting Technique and Rationalize Decision Making.....................6

1.2 Statement of the Problem.................................................................................................7

1.3 Objectives of the Study....................................................................................................8

1.4 Significance of Study.......................................................................................................9

1.5 Hypotheses.....................................................................................................................10

1.6 Limitation of the Study..................................................................................................10

1.7 Organization of the Study..............................................................................................11

Chapter II Literature Review and Theoretical Framework................................................12

2.1 Literature Review..........................................................................................................12

2.2 Summary of Literature Review.....................................................................................52

2.3 Conceptual Framework..................................................................................................52

2.4 Research Gap.................................................................................................................54

Chapter III Research Methods...........................................................................................55

3.1 Research Design............................................................................................................55

3.2 Population and Sample..................................................................................................55

3.3 Data Source and Collection Methods............................................................................55

3.4 Statistical Tools.............................................................................................................56

3.5 Method of Data Analysis...............................................................................................56

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 3.6 Software Used................................................................................................................56

3.7 Test Validity and Reliability..........................................................................................57

Bibliography......................................................................................................................58

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