Effect Of Demand Management On Profitability

INTRODUCTION
The effect of demanding management on profitability. The standard demanding as a tool for either improves or not improving profitability and managerial effectiveness. Unlike its contemporaries in the field of science, it deals with human beings and calculating significant information. Standard demanding as a long established concept is the management function of planning and control. In effect, yardstick has been of vital importance for planning and control exercise. As a matter of facts, problems associated with production and earning a profit was recognized for many years before the concept of standard demanding was invented.
One of the earlier attempt at demanding was by James Dodson. He showed how the books were kept by a shoemaker ranging from this period onwards, there was a steady development of demanding developed in the time of our early scientific management proponents such as Fredrick W. Taylor, Henry Fayol and others.
These standards demand reveal goals, spur actions and efforts for effective management and equally provide checks such that exceptional profit oriented goal performance can be achieved and the reverse adequate punishment to be exercised for bad performance. Demand cause appraisal to be made over production facilities and form management intentions and capabilities and is a first step strength and weakness appraisal. These led to the preference of standard demanding to other method. With the development of standard demanding system in 1920s, it was brought into the accounting system such that total variances might be accumulated as well as detailed variances. These steps gave rise to formal expression that significant demand were not actual and historical demand but standard or planning demand and their variances.

1.1 BRIEF HISTORICAL BACKGROUNDS:
Ferdinand Industries Nigeria Ltd is a company used in this study. This company is located at Urualla in Ideato North Local Government Area of Imo State of Nigeria. It is a limited liability company incorporated in1975. The management of industries is made up of:
(i) Executive Directors
(ii) General Manager
(iii) Factory and department managers and other employees.
(iv) Other employees.
The company has two major operational industries used for this project, which includes:
1. Ferdinand Aluminium Manufacturing Industry
2. Ferdinand Filters Manufacturing Industry.
Ferdinand Industries Nigeria Limited started operation with initial capital base of seven hundred and fifty thousand naira (N750,000.00) as the authorized and subscribed capital. This initial capital base does not include loans obtained from financial institutions and assets obtained on lease, subject to gradual payments. Ferdinand Group of Companies Plc are subsidiaries while Ferdinand Group of Company Plc is a holding company housing these industries and others.
FERDINAND ALUMINIUM MANUFACTURING INDUSTRY
Ferdinand aluminium manufacturing industry started operation fully in 1975 with staff strength of two hundred workers made up of male and female. This industry is headed by a manager who takes directives from the executive director.
Ferdinand aluminium manufacturing industry produces a range of high quality aluminium domestic and cooking utensils which include:
(i) Heavy gauge luxury castrates
(ii) Fry pans
(iii) Kettles
(iv) Luxury aluminium plates
(v) Luxury aluminium cups
(vi) Luxury aluminium bowels with cover
The above enumerated products are produced in sets, and their brand name is ‘Touch’ the emblem of the products bears a ‘Touch’ as the trade mark.
The staff of Ferdinand Aluminium Manufacturing industry is trained under the expertise acquired from A.I kalogeros (export) Limited, Cyprus.
The raw material used for production by this industry is got locally. It is obtained from Aikan Aluminium or first Aluminium Plc, Port Harcourt.
FERDINAND FILTER MANUFACTURING INDUSTRY
Ferdinand Filter Manufacturing Industry started operation in 1982 with staff strength of two hundred male and female workers. The industry is headed by a General Manager who takes directives from the executive director.
Ferdinard Filter Manufacturing Industry produces high quality and high performance Ferdinand Soparies automotive filters used by different motor vehicle and industrial plants. The staff of Ferdinand filter manufacturing industry are trained under the expertise acquired from Soparies Company Limited: a company based in France. Among the different types of filters produced include:
(a) Opinion Filter
(b) Element filter
(c) Special filter and
(d) Air cleaner
The above enumerated products are produced in different branches and sizes and below is the detailed analysis of the different types of filters produced.
(a) Opinion Filters
BRANDS USERS
(i) CV 325 Volvo cars
(ii) CV 379 Peugeot Cars
(iii) CV 394 Vox wagen cars such as Santana Passat
This type of filter is called opinion because it is designed in a manner that it is fixed in a vehicle by spinning or screening inside to get balanced. It is used for filter oil that gets into engine. The cuter cover of spinion is made of thick gauge metal.
(b) Element Filters
BRANDS USERS
Cap 330 Mercedes benz lorries
Sop 8 Flat lorries
Sop 117 Mercedes benz lorries (new model)
Cap 326 Mercedes benz lorries buses
This type of filter is cylindrical in nature with thick gauge perforated paper cover or light gauge perforated metal cover. The two heads are sealed with un-perforated thick gauge paper or metal.
(c) Air cleaner Filters
BRANDS USERS
FPA Ranger Rovers
FPA 300 Opel cars
Air cleaner is designed in the same manner with element filter.
(d) Special filter: Special filter is specially designed for industrial plant. NAFCON, NNPC, and DELTA STEEL etc. Some of the raw material used for manufacture of Ferdinand soparis automotive filters are got locally and some imported. The filter is made of many components which includes:
1. Filter paper: This is of different types, which include oil paper, fuel paper and air paper.
2. Metal: This is of different gauges or thickness ranging from 0.25, 4, 5, 6mm etc. to 3mm are used for spinion outer cover.
3. Gaskets: This is of different types, which include: rubber gasket and paper gaskets.
4. Special Gums: It is used for the end covers of the filers and is called “plastisol”. There is also colour plastisol used for special filters.
5. Springs and Gauge: They are of different sizes.
6. Paints: For colour such products like the spinions such a paint is called Ferdinand blue, is used to differentiate Ferdinand products from other products.
7. Printing materials such as white ink
8. Packets: Is for packaging of produce/filer.
9. Cardboard papers: Use outer shape of filter of paper cover.

1.2 STATEMENT OF THE PROBLEM:
In Nigeria today, the economy is extremely bad. In this respect, a lot of measures have and are being taken to better the destining economic situation. Among the measures introduced to revamp the economy include:
(a) Structural adjustment programme (SAP)
(b) Second-tier foreign exchange market.
(c) Foreign exchange market
(d) Bank on importation
(e) Ban on importation etc.
This measures have had and still having adverse effect on the buying attitude of the consumers. Demand of production have increased in manufacturing sector of the economy, which, in effect, has resulted to high prices of manufacturing goods. In respect, no applicable level of demand could be recorded by most manufacturing, as the buyer’s purchasing power could not longer meet up with the rising price levels. Most of the manufactured products are consumed by civil servants, public servants and other wage earners whose take home pay pockets can no longer take them home. In this regard, consumers utilize their little purchasing power mainly on foodstuff to sustain themselves first before luxury. With the economic reason, greater efforts should be made to keep demand to the lowest minimum, through efficient and effective utilization of both human and material resources. The above mentioned does not end it up, more problems still come up from such other areas like:
(i) Irregular supply of power: The Nigerian Electrical Power Authority (NEPA) do not render adequate services to manufacturers. NEPA will take off power and the production operation will stop unscheduled thereby resulting to much damages which the demand is added to cover all production.
(ii) Inadequate supply of Water: Water is always in short supply and in most cases, water board do not supply water when manufacturer needs it in effect. The manufacturer resort to buy water needed for their production from open markets to see that manufacturing activities are going on. In this respect, the price of getting water from open market is demandlier than that from the water board and in most cases whether water is supplied or not water board will require you to pay a reasonable monthly water rate.
(iii) Bad Roads: In respect of transporting raw materials used, from the extraction area and evacuation of finished goods from manufacturing industry to the market where it is demanded, high transport demand are made due to bad roads in Nigeria with special reference to Imo State and Ideato North in particular.
(iv) Foreign Competition: Most of the indigenous manufacturers are not give protection from foreign competitors, and in most cases are derived tax holiday.
There has been decreased profitability resulting from increased demand. In effect, requires greater demand reduction and profit optimization. This can only be achieved through setting reliable standards, ensuring that such standards are mentioned and variances not adversely very large (significant) without proper cause. The system helps demand reduction to increase profitability.
Another major problem centers on lack of adequate control of scarce resources by indigenous manufacturers. Most of the resources used, requires special storage facilities. Where they are stored before they are utilized to avoid spoilage. In most cases, the storage facilities may be beyond the reach of some manufacturers. Along the line, most manufacturers do not have adequate control over these resources, as they are easily impact upon by government. Polices may be favourable or unfavourable to manufacturers. To Nigeria, there can be evidenced to restrictions and total ban as most of them are imported.
Indiscipline in most industries is one other major problem encountered in realization of targets (standards strikes and work to rule actions contribute immensely to increase demand for the period as the production level did not get to the expected target.
The use of unqualified and inexperienced accountants by some industries pose greater problem to such industries for the accountants cannot adequately apply the accounting techniques required of them on standard demanding.
Regarding this, objections to standard demand are attributed to employment of inexperience staff and the presentation of figures, which are difficult to interpreter.
Top management ignorance and lack of support of accountants recommendations on standard demanding hinders improvements of the management. A lack of education on the use of accounting as a tool of management is very evident.

1.3 PURPOSE OF THE STUDY:
While carrying out this research, tow broad aspects are borne in mind, which includes:
(a) Establishing a framework that would guide accountants and managers in the employment of standard demanding.
(b) To know the extent standard demanding principles adopted are used in practice in Nigeria business management.
The emphasis has been placed on the employment of the techniques as a tool of management toward profit orientation and to be an integral body of business management. The various uses of the object of this research work, in effects, it is to identify the possibility of standard demanding or profitability and managerial effectiveness and their possible relationship. Provide possible solutions and based on the findings, make recommendations for effective management.

1.4 SIGNIFICANCE OF THE STUDY:
It is believed that standard demanding aids management to plan for the future, and if any justification is required for this research project on he effect of standard demanding on profitability and managerial effectiveness to manufacturing industries, the view of Robert Appleby. One of the early British industrialists should be released on. Appleby regards the key to managerial success as the setting of standards for all business activity and measurement of performance against the standard.” He states that financial measurement should penetrate into every cranny of the enterprise and indoctrinate all managements in their working habits. In this regard, there is the need to prove whether standard demanding is more variable and preferable option to other demanding methods adopted for each product produced. There is a limit to the price charged for the production.
In effect, demand should be given the maximum attention. In his manner, since revenue less demand gives balance of profit should be increased, as it is what every industry is aiming at.

1.5 SCOPE OF THE STUDY:
This research project centers on the manufacturing industries of Ferdinand Nigeria Limited, Urualla in Ideato North Local Government Area of Imo State. The purpose is to accommodate the accounting needs of the operational division of the management. In the effort to validate, the hypothesis of this project, respondents were mainly the executive director, general managers, Accountants and some other accounting officers in charge of demand in the industries.

1.6 LIMITATIONS OF THE STUDY:
Regarding limitations on the effect of profitability and managerial effectiveness in respect to this research. The following hindrances were encountered, as there was relevance on the part of most managers to revulge information.
This is so because individual business management devises their own system to suit their particular needs. For fear of competition, information relating to individual management methods of the profit orientation are divulged. Most organizations regard the employment of standard demanding systems as a waste and sometimes don’t apply them. Most management executives normally say that “we are a relative young business orgnisation and has not employed the services of a demand accountant to care for demanding. Our interest, meanwhile, is on financial accounts.”
A lot of management organization regard to information required as confidential and as being contrary to policy to disclose. In this respect, the questionnaire did not ask for information that will be useful to other business organizations in specific circumstances, and does not require details of demand or prices. It also designed to elicit information of the methods adopted in controlling demand and arriving at a favourable management decision.

1.7 ASSUMPTIONS OF THE STUDY:
Some useful assumptions are made in the course of the research which includes:
(i) Standard demanding is set: It remains unchanged as long as the method of operation and basic prices used to set them remain the same.
(ii) Standard demanding is operational.
(iii) Management is furnished with periodic analysis of differences between causes and operational divisions responsible.
(iv) Within the management, there is an established arrangement that enables prompt investigation and action to be taken on on-profit oriented or adverse significant variances.
(v) The Management system, should not be regarded as to allow the demand to be amended at intervals where need arises.

1.8 RESEARCH HYPOTHESIS:
As this project work progresses, before it is rounded off, it would prove if there exists any relationship between standard demanding on profitability and managerial effectiveness. If standard demanding is a more reliable option to other demanding methods employed to improve profitability and managerial effectiveness.
To this effect, the following hypothesis will be set and will be tested.
i. Hi: Improvement on profitability and managerial effectiveness has much to benefit by employing standard demand techniques.
ii. Ho: Accurate demand is not an appropriate tool of measuring profitability and managerial effectiveness in the form of realistic profits.
iii. Ho: Standard demanding technique leads to immediate detection of inefficiency.
iv. Hi: Demand produce realistic profit which is a true measure of profitability and managerial effectiveness.
v. Hi: Demand produce realistic profit, which is a true measure of profitability and managerial effectiveness.
vi. Ho: Standard demanding techniques does not spur management for greater level of profitability and managerial effectiveness. In addition to the above hypothesis, more may be formulated and their validity ascertained in chapter four, dealing on data presentation and analysis and interpretation of the research work.

1.9 DEFINITION OF TERMS:
The concept of standard demanding as predetermined or forecast estimates of demand is wide and varied. The area covered in this research work is dynamic and contains several terms for effective communication, the terms used in this research work intends to have the same understanding with the definition of standard demand by institute of demand and management accountants (ICMA) as “the predetermined demand calculated in relation to prescribe set of working condition. Co-relating technical specifications and scientific measurement of materials, labour to the prices and wages rate expected to apply within the period which the standard relates with an addition of appropriate share of budgeted overhead. Its main purpose is to provide basis for control through variances accounting for the valuation of stocks and work-in-progress, and exceptional cases for fixing selling prices.”
(a) Standard Demanding: Implies setting up demand for goods and services.
(b) Standard hour: Refers to the quality of output or amount of work, which should be performed at a specific time, normally in one hour.
(c) Variance accounting: Is an account that centers on future planning activities of an organization, as compared with the historical activities, the activities being expressed in budgets, demand, standard selling prices, standard profit margins and the differences between those and the comparable actual results to be accounted to the management periodically and the responsibility centers, the analysis centering on the operating profit variance.
(d) Variance analysis: It is concerned with section of the variance accounting that relates to the analysis into constituent sections of variances between planned and actual performance.
(e) Demand Variance: It refers to the difference between the standard demand (planned) and the comparable actual and historical demand incurred during a specified period.
(f) Seasons Variance: Is that portion of the volume variance which is due to the difference between the seasonally budgeted output and the average output on which standards have been calculated (the sum of the seasonal variations over a complete year would be zero).
(g) Controllable Variance: It is a demand variance, which can be identified as the primary responsibility of specified person.
(h) Sales Variance: Is the difference between budgeted value of sales and the actual value of sales achieve in a given period.
(i) Profit or loss Variance: Is the difference between the budgeted or planned profit or loss and the actual profit or loss. Is to comprise the sum of variance appropriate to standard demand of sales? The sales margin variances, and variances on any charges, which have not been, included in the standard demand of production.