THE EFFECTIVENESS OF COST-VOLUME-PROFIT ANALYSIS IN MANAGERIAL DECISION-MAKING IN YOLA SOUTH LGA
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- NGN 5000
Background of the Study
Cost-Volume-Profit (CVP) analysis is a financial tool used to determine how changes in costs and volume affect a company's operating profit. It is widely used by managers to make informed decisions regarding pricing, production, and budgeting. In Yola South LGA, businesses face varying levels of uncertainty due to fluctuating costs, market conditions, and consumer preferences. This study aims to evaluate the effectiveness of CVP analysis in aiding managerial decision-making in the region, focusing on how this tool helps managers optimize costs, profits, and overall business performance.
Statement of the Problem
Despite the widespread use of CVP analysis in large corporations, its application in smaller businesses in Yola South LGA is not well-documented. Many managers may lack the knowledge or skills to effectively use CVP analysis in their decision-making processes. This study seeks to examine the impact of CVP analysis on managerial decisions in the region, identifying its strengths and limitations and providing recommendations for improvement.
Aim and Objectives of the Study
Aim: To evaluate the effectiveness of Cost-Volume-Profit analysis in managerial decision-making in Yola South LGA.
Objectives:
- To assess the knowledge and application of CVP analysis among managers in Yola South LGA.
- To determine the effectiveness of CVP analysis in making cost-related decisions and maximizing profitability.
- To explore the challenges faced by managers in implementing CVP analysis in their decision-making processes.
Research Questions
- How do managers in Yola South LGA use Cost-Volume-Profit analysis in their decision-making processes?
- How effective is CVP analysis in helping managers optimize costs and profitability?
- What challenges do managers face in applying CVP analysis in Yola South LGA?
Research Hypothesis
- H₀: Cost-Volume-Profit analysis is not significantly used in managerial decision-making in Yola South LGA.
- H₀: CVP analysis does not significantly affect managerial decisions regarding costs and profitability.
- H₀: Managers in Yola South LGA do not face significant challenges in implementing CVP analysis.
Significance of the Study
The findings will provide valuable insights into the application and effectiveness of CVP analysis in small and medium enterprises in Yola South LGA. This will help business managers understand the benefits and limitations of using CVP analysis, ultimately improving their decision-making processes.
Scope and Limitation of the Study
The study will focus on SMEs in Yola South LGA. Limitations include the reliance on managers' self-reporting of their use of CVP analysis, which may introduce bias or inaccuracies.
Definition of Terms
- Cost-Volume-Profit (CVP) Analysis: A financial analysis tool used to determine how changes in cost and volume affect a company's profit.
- Managerial Decision-Making: The process by which managers make choices that affect the performance and direction of an organization.
- Profitability: The ability of a business to generate more revenue than its expenses, resulting in profits.
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