Divisional Performance Evaluation The Re

WEST AFRICAN JOURNAL OF BUSINESS AND MANAGEMENT SCIENCES
FACULTY OF BUSINESS ADMINISTRATION

IMO STATE UNIVERSITY, OWERRI
NIGERIAN EDITION
VOL. 7 NO.1 OCTOBER, 2017
DIVISIONAL PERFORMANCE EVALUATION: THE RELEVANCE

OF COST AND MANAGEMENT ACCOUNTING
OKPALA, Kenneth Enoch1 (corresponding Author)

Department of Financial Studies (Accounting)
Redeemer’s University, Nigeria
Email: enocharticles@gmail.com
Tel: +234 08055071683
AKINYOMI, Oladele John 2

Department of Accounting & Finance,
Mountain Top University, Nigeria
Email: akinyomio@gmail.com
Tel: +234 08038673767
OMOYELE, Olufemi 3
Department of Business and Economics (Business Administration)
Redeemer’s University, Nigeria
Email: omoleyef@run.edu.ng
Tel: +23 4 08035634973
Abstract
One of the problems of large organizations is the complexity of management which affects
planning, and control by the central management, accountability of resources used and
determination of the contributions of individual unit to the overall objective. This study investigated
the responsibility centres performance evaluation and cost and management accounting. A
questionnaire based study research design was used and five (5) Nigerian conglomerates with
4,952 management staff were the study population. The sample consists of 696 representing 15% of
4,640 from four organizations randomly selected based on accessibility and adequacy of
information. One way ANOVA and Karl Pearson Product Moment Correlation Co-efficient
techniques were used for data analysis and hypotheses confirmation. The relationship between the
independent variable and sub-variables of the dependent are statistically significant (CRC and IRC
p = .000 < .05; RRC p = .004 < .05, and PRC p = .003 < .05) while the responsibility centres
performance evaluation and cost and management accounting is significant at p = .000 < .05. The
study recommended that the use of cost and management accounting in evaluating responsibility
should be supported by top management to determine the responsibility centre viability in the
conglomerates.
Key words: Performance evaluation, Responsibility centres and Cost and management accounting
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OKPALA, KENNETH ENOCH, AKINYOMI, OLADELE JOHN, OMOYELE, OLUFEMI
DIVISIONAL PERFORMANCE EVALUATION: THE RELEVANCE OF COST AND …….
Introduction
One of the problems of large organizations is the complexity of management which affects
planning and control by the central management, accountability of resources used by various
sections and subsections and the determination of the contributions of individual units to the overall
results of the organization. In order to address these issues, large organizations structures their
operation into small separate entities for the purpose of effective business management. The
segregation may be in accordance with products in multi products environment, region in widely
disperse group or specializations in conglomerates. The influence of structure with their impact on
the overall organizational efficiency has been in the research focus in recent years due to its value in
viability assessment (Quangyen & Yezhuang, 2013). A structure may be centralized or
decentralized and when decentralized, it could further be structured into divisions to allow each
manageable segment the required autonomy in decision making process. The divisionalized
structure gives birth to decision making organs specifically designed and adopted by top
management for the purpose of day to day running of the organization. Each manager is held
accountable for the activities of his centre which may be includes cost incurred, revenue generated,
profit earned or investment undertaken to maximize further wealth (Atu, Ogbeide, Agbo, & Ozele,
2014). The manager of each unit establishes his centre’s specific and measurable goals and directs
and motivates them to achieve the set objectives (Khalifa & Shafii, 2013; Tabitha & Ogungbade,
2016). Each centre’s goal is a subset of the overall corporate objectives. The evaluation of each
responsibility centre’s performance is conducted through responsibility accounting which is a
component of cost and management accounting system. It is employed to classify, measure and
report each centre activities according to areas of responsibility (Al-shomaly, 2013). The
accounting report prepared for each centre should reflect the degree to which the center manager
controlled his division’s activities. It would assist the central management in making the general
corporate decision (Drury, 2006; Mojgan, 2012; Adeniji, 2015). The assessment of responsibility
centres requires evaluating performance in financial terms and the report should focus only on the
activities controlled by the individual centre manager. However, non-financial elements of the
centre’s performance, such as quality of service that created the financial results in the long run
should also be considered (Al-shomaly, 2013). The foundation of this study was based on the
assessment of the responsibility centres operations in financial terms as used in previous studies
(Schoute, 2008; Opoku-Asante, 2013).
The Issue
The insufficient research conducted on responsibility centre performance evaluations in
Nigeria and the failure of the existing studies to directly address the relationship between each
responsibility centre and cost and management accounting has created some gaps in the body of
knowledge. This study intended to produce empirical evidence that would resolve the issues and
contribute to literature. The main objective of the study is to investigate the relationship between
responsibility centres performance evaluation and cost and management accounting. The specific
objectives to be pursued as a means of resolving the general objective were the determination of the
relationship between performance evaluations of: cost centre, revenue centre, profit centre, and
investment centre and cost and management accounting in Nigeria conglomerates.
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WAJBMS-IMSUBIZ JOURNAL VOL. 7 NO.1 OCTOBER, 2017
Literature Review
Performance assessment is crucial to management of any corporation that wants to keep her
operations under control and achieve the targeted objectives within the set time frame and cost. In
order to have a meaningful performance appraisal in large organization, management should view
the company in segments. Each centre should be accountable for its actions and results (Mojgan,
2012). A responsibility center is akin to a small business unit which may be a department within a
single company, a branch in a chain store or a subsidiary company under the parent company. As a
business grows in size, it would eventually reach a stage where it becomes appropriate to split it up
into smaller and more manageable units to decentralize decision making. The degree of
decentralization may also occur under the following conditions: (i) take-over of companies in which
the structure automatically makes the acquired companies a subsidiary of the parent, (ii)
specialization become necessary when a business has a diverse and complex operations, (iii)
uncertainty and volatile market environment may also lead to division to enable managers take
responsibility for smaller and closer sphere of influence, (iv) division of organization into smaller
groups can be used to gain tax liabilities advantage, and (v) managers need incentives to perform
well hence they are motivated when responsibility is tired to reward system. In modern business
environment the use performance-based review has several benefits one which is linking managers
to the performance of their centres (Kontane & Kuzmina-Merlino, 2012).
According to the Chartered Institute of Management Accountants –CIMA official terminology
(2016). A responsibility centre is a part or subunit of a company for which a manager has authority
and responsibility. The company's detailed organization chart is a logical source for determining
responsibility centers (Jensen & Meckling, 1999). CIMA classified responsibility centre as an
organizational unit headed by a manager, who is responsible for its activities and results.
Responsibility centres are classified into four. (i) First, cost centre also known as expense centre is a
production or service function unit where activity or item of equipment costs may be attributed to
cost units. The responsibility of cost centre is the accumulation of production costs under the
control of the centre manager and reporting the same to the central management. Only those costs
controllable by the manager of the cost centre are charged to the centre. (ii) Second, revenue centre
is a responsibility centre in which manager controls revenues but does not control cost of
production or service. A revenue centre may be in form of sales depot and the functions include
control on selling prices and quantity, product mix and promotional activities. (iii) Third, profit
centre is a responsibility centre which is accountable for costs and revenues and resulting profits. It
may also be called a business centre or strategic business unit. (iv) Forth, investment centre is a
responsibility centre in which the managers and his employees control revenues, costs, and the level
of investment initiated (Quangyen & Yezhuang, 2013; Olalekun & Tajudeen, 2015).
One of the conditions for a successful decentralization is that the various divisions should be
more or less interdependent no matter the level of autonomy. In practice, it is unlikely that certain
amount of inter-divisional trading takes place and where goods and services are passed between
divisions, transfer pricing policy is needed to account for the trading activities. The two main
organizational structures used for responsibility centres are functional or divisionalized. Functional
organization: The functional organization is a type of
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organizational structure that uses the principle of specialization based on function. It allows
decisions to be decentralized since issues are delegated to specialized persons or units, leaving them
with the responsibility of implementing, evaluating, or controlling the given procedures or goals.
Functional organizations contain specialized units that report to a single authority, usually top
management. Each functional unit handles one aspect of the product or service provided (Nelson &
Quick, 2011). Top management is responsible for coordinating the efforts of each unit and fitting
them together into an interconnected whole. The goal of functional structure is to harness all the
human and information resources necessary for a single or set of activity in the production of goods
or service rendition. This structure helps to maximize performance by facilitating sharing of
valuable expertise by superiors with their subordinates. However, functional structure is
bureaucratic therefore supports complicated communication and long decision-making processes on
the ground that functional units are not accountable to one another (Elsaid1, Ahmed, & Abdalla,
2013; Rishipal, 2014). The functional structure is represented in figure 1.
Chief Executive
(IC)
Production Marketing Finance & Purchasing Technical &

(CC) (RC) Admin (CC) (CC) Engr (CC)
Figure 1: Functional Structure

Source: Author Conceptualization (2017)
(ii) Divisional structure: This structure also called a product structure; breakdowns the organization
into a number of self-contained divisions. A self-contained division is a collection of roles that
work together to produce a product and develop a complete strategy. Each division is created
according to the type of products or services produced, the geographical area served and customer
needs in the market to operate as separate profit centers (Greenberg, 2011; Ovunda, 2015). The
structure is based on an extensive delegation of authority and the performance of each division can
be measured directly. In addition, managers can be held accountable for the operations of their
division. This structure leads to better performance of division managers as well as increased
employee morale. Other advantages of a divisional structure include a more efficient and effective
ability in coordinating activities among divisions, greater flexibility in responding to changes in the
local market and a simpler process in changing the size of the business by merely adding or
removing divisions (Quangyen & Yezhuang, 2013; Rishipal, 2014). This structure is represented in
figure 2.
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Chief Executive
(IC)
Product A Product B Product C

Mgr. (IC) Mgr. (IC) Mgr. (IC)
Other functions Other functions Other functions

(CCs) (CCs) (CCs)
Figure 2: Divisional Structure

Source: Author Conceptualization (2017)
Cost management accounting

Cost accounting is the accounting practice that captures a company's costs of production by
assessing the input costs (fixed and variables cost) of each step in the production process. It was
originally used in manufacturing companies and later extended to service oriented corporations
(Adeniji, 2015). According to Okpala (2012), management accounting is an extension of cost
accounting. It is the application of professional knowledge in preparing management reports and
accounts that provide accurate and timely financial and statistical information required by managers
for short-term and long term decisions. Cost and management accounting system is crucial in
understanding and evaluating organizational performance. It allows cost data to be collected,
summarized, and condensed as information flows upward to higher levels of management (Ovunda,
2015; Avinash, 2017). Performance evaluation is a component of performance management system
which provids information and decision suport to management in operational and startegic context
with a focus on linking costing, management accounting and quantitatative methods to crital
success factors (Adeniji, 2015). Performance evaluation is achieved through establishment of
targets, cost ascertainment, and providing actual cost figures for comparison with estimates. Lucey
(2003) noted that the comparison between actual and planned figures will reveal the extent of
variance, inefficiencies and various forms of wastages in the operation. This would also serve as a
guide for future estimates and encourages management by exception (Vonasek, 2011; Lunenburg,
2011; Okpala, 2017). The aspect of cost and management accounting principles which applies to
performance measurement is known a responsibility accounting.
Responsibility accounting
Responsibility accounting also called productivity accounting or activity accounting is a system that
identifies different assessment or responsibility centres during the organization and traces costs and
revenue, assets and liabilities to the individual managers who are primarily responsibility for
making decisions about the centre involved (Avinash, 2017). It is an underlying concept of
accounting performance measurement systems which is suitable where top management has
delegated authority for making decision making to divisional managers. The
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idea behind responsibility accounting is that each manager's performance should be judge by how
well he or she manages those items under his or her control. According to the Institute of Cost and
Works Accountants of India (ICWAI) responsibility accounting is a system of management
accounting under which accountability is recognized according to the responsibility entrusted to
various levels of management and management information and reporting structure introduced to
give sufficient feedback in terms of the entrusted responsibility (Schoute, 2008). Responsibility
accounting is a management organized system for measurement of division presentation of an
organization that helps not only in control but also in planning and decision making. Benson, Stone,
and James (2016) noted that in order to effectively evaluate a responsibility centre’s performance,
responsibility accounting is needed and the following basic requirements must be present: First, the
business must be organized to enable responsibility assigned to individual unit managers. Second,
managers and their lines of responsibility should be fully defined using organogram to show the
basis for reporting. Third, cost and management accounting system should be implemented to allow
responsibility accounting reports. Last, controllability criterion is crucial to the content of
performance reports for each manager. A manager should only be held responsible for activities
under his control which may be absolute or relative. In absolute control, a manager should have
unconditional control over any item he is to be held responsible. However, this controllability
pattern is rare in practice due to frequent external or internal factors beyond a manager's control.
Relative control as a basis for evaluation may lead to some motivational problems, since managers
may be evaluated on results that may not reflect the manager's efforts or decisions (Ovunda, 2015).
The effective performance assessment of responsibility cenres is only possible when clear lines of
responsibility are established. Responsibility accounting reports is produced to aid management
functions although the amount of report detail varies. Each centre’s reports are interrelated and the
report from a level of management is carried forward in the report of the next immediately above
(Avinash, 2017). The objective of responsibility accounting includes: (i) providing a basis for
evaluating the quality of the divisional managers’ performance, (ii) motivating the divisional
manager to operate his division in a manner consistent with the basic goals of the organization as a
whole, (iii) determining the contribution of each division as a sub-unit in relation the organization’s
total contribution which is the principle of goal congress. Responsibility accounting method does
not only assists the organization in evaluating performance of each centre but also used to influence
the effectiveness of the centre manager as well as determining corrective actions and reward system
(Scott, 1997; Ovunda, 2015).
Theoretical foundation
The foundation of this study was based on two baseline theories. They are the theory of
responsibility centre and the contingency theory in management accounting. The theory of
responsibility centre was initially used by Jensen and Meckling in 1999 to explain the
circumstances in which each of the four types of responsibility centres were likely to be the most
efficient. The theory considers a principal-agent model to examine the effectiveness of
responsibility centres evaluation, in particular cost and profit centres. The theory shows that rather
than contracting with each agent directly, the principal can create equally powerful incentives by
setting up a responsibility centre structure. This enables the principal to contract
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only with the centre manager who delegate responsibility to other agents and coordinate their
activities. The principal must then monitor and measure performance of the centres. In this study,
the responsibility centre theory is supported by the theory of contingency in management
accounting which describes the situational factors and portrays them as conditional. Situational
factors are unique in nature and are categorized into six foremost areas according to the dominant
characteristics of such circumstances. They are the external environment, strategies and mission,
technology involvement, firm interdependence, business unit, firm and industry in which they
operate. Such factors vary from one organization to another. It is impossible to describe the
character of management accounting in the occurrence of each of the above factors. This theory was
adopted in Bouckova (2015). Accounting system is contingent upon the situational factors in reality
which suggests that circumstances in which the organizations move are distinctive in nature and
largely affect the adoption, mechanism, and sophistication of management accounting system.
These contingent factors are major contributors towards non-formation of universally acceptable
effective management accounting system. In consideration of these theories, Lucey (2003) stated
that responsibility accounting involves dividing the organization into various responsibility centers to
facilitate performance measurements in financial terms.
Empirical Review
Some of the recent previous studies in Nigeria captured to support this research include: Akenbor
and Nwaiwu (2013) who examined the effectiveness of responsibility accounting system in
evaluating segment performance. Structured questionnaire was administered to a sample of thirty-
two (32) accountants in the manufacturing industry in Rivers State. Chi-Square (x2) was used for
data analysis and the result showed that responsibility accounting system has no significant effect
on evaluation of segment performance of manufacturing firms. Atu et al. (2014) conducted a
research on overview page of responsibility accounting. The paper focused on responsibility
accounting issues and the effect of structure and transfer pricing on the Nigeria economy. The
analysis result showed that structure has significant relationship with performance as well as
reduction of corporate tax burden which is one of the factors effecting transfer pricing on the
economy. Oyerogba, Olaleye, and Solomon, (2014) investigated the relationship that exists between
cost management practices and firm’s performance in the manufacturing organizations using data
from 40 manufacturing companies listed on the Nigeria stock exchange from 2003 to 2012. The
result indicated that a positive significant relationship exists between cost management practices
and firm’s performance.
Other studies conducted outside Nigeria include: Mojgan (2012) examined the role of responsibility
accounting in organizational structure. A cross sectional research design was employed. The study
concluded that responsibility accounting can be used to determine each manager's responsibility to
achieve the set goals in the organization. This is done through the costs and revenue accumulation
by individual responsibility centre and reporting same to the management. Al-shomaly (2013)
studied performance evaluation and responsibility accounting. The aim was to expose performance
evaluation methods in the health care sector in Jordan and their relationship with the responsibility
accounting principles. The study concluded that the institutions are partially adopting the
fundamentals of responsibility accounting system in the evaluation of its performance. Opoku-
Asante (2013) evaluated divisional performance evaluation tools employed by indigenous Ghanaian
banks. The purpose of the study was to
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identify the types of measurement used by local Ghanaian banks to measure the performance of
their branches. Financial and nonfinancial statistics were collected. Mean scores and standard
deviations, tables and graphs were used for descriptive and data analysis of respondents’ opinion.
The study concluded that there is significant relationship between financial tools and performance
measures. Jaradat, Alazzam, and Rumman (2016) studied the availability of components accounting
in industrial companies in Aqaba. Survey questionnaire was used and data analyzed. The study
concluded that availability of responsibility centre accounting has helped in the targets achievement
of the designated centres. Agyei-Mensah (2017) investigated divisional performance
measurement in the retail financial service sector. The purpose of this paper was to test how
performance measurements are applied in divisionalized financial service. A mixed research
design of questionnaire survey and financial statements of the 129 respondent companies were
collected and analyzed. Finding showed that branch managers do not have full autonomy and
control over the allocation of common resources costs which form part of their evaluation.
Gaps and development of hypotheses
Insufficient studies conducted on the relationship between responsibility centres performance
evaluation and cost and management accounting in Nigerian context coupled with lack of the
existing studies to directly address the relationship between the dependent sub variables and
independent variable has prevented conclusion. Therefore this study was conducted to generate
empirical evidence to bridge the identified gaps. Based on this premise, the following hypotheses
were developed to enable the researcher investigate the relationship between sub variables of
responsibility centres performance evaluation and cost and management accounting in Nigerian
conglomerates.
H01: There is no significant relationship between cost centre performance evaluation and cost and
management accounting. The hypothesis 1 was measured by the linear equation 1
cma1 = β0 + β1 (CRC) + ε1----------------- (1)
H0 2: Revenue centre performance evaluation does not have significant association with cost and
management accounting. The hypothesis 2 was measured by the linear equation 2
cma2 = β0 + β2 (RRC) + ε2----------------- (2)
H03: The relationship between profit centre performance evaluation and cost and management
accounting is not significant. The hypothesis 3 was measured by the linear equation 3
cma 3 = β0 + β3 (PRC) + ε3----------------- (3)
H04: There is no significant relationship between investment centre performance evaluation and
cost and management accounting. The hypothesis 4 was measured by the linear equation 4
cma 4 = β0 + β4 (IRC) + ε4----------------- (4)
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Methodology
This research employed a questionnire based study method. The population of the study consists of
five (5) Nigerian conglomerates with 4,952 management staff. Conoil Group of Nigeria (CGN) with
312 staff was excluded due to inadequate information. The four organizations with a total of 4,640
staff were selected based on adequacy and accessibility of informaton. The source list consist of
696 staff which is 15% of 4,640. The criteria for the sample were: (i) the conplomerate must have
at least four responsibility units (subsidiaries, branches or atonomous department) within Nigeria,
(ii) staff must have at least five years cognate experience in their respective organizations, (iii) each
unit operations and their line of reporting are properly defined to aid evaluation and management
informatio system. Ramdomly selected were subsidiary GMs/Eds/MDs (investment centres);
finance department managers (cost centres); production department managers (cost centres);
marketing department managers (revenue centres); purchaing department managers and Strategic
Business Unit managers (profit centres) from Dangote Group (DG), John Holt Plc (JHP),
Transnational Corporation of Nigeria (TCN), United Africa Company of Nigeria (UAC). The
population distribution is defined in Table 1.
Table 1 Population distribution
Staff Member DG JHP TCN UAC

TOTAL
Subsidiary GMs/EDs/MDs 10 13 14 25 62
Finance / Accounts Dept 49 37 31 45 162
Marketing/Sales Dept 29 25 16 27 97
Production/ Assembly Dept 58 35 15 49 157
Purchase /Warehousing Dept. 34 31 23 30 118
Strategic Business Unit 18 25 16 41 100
Total 198 166 115 247 696
Source: Researcher’s Field work (2017)
The instrument was personally generated and utilized 20 items, 7-point Likert scale [strongly
disagree (1), disagree (2), fairly disagree (3) Average (4), fairly agree (5), agree (6), and strongly
agree (7)]. The questionnaire was structured into Section A and B for demographic and inferential
data and was validated by experts. The construct validity conducted exhibited the values between .
679 and .705 > .05 which shows that the instrument was valid and the variables could be used for
further analysis. Reliability of the instrument was assured through a pilot study conducted in
January, 2017 on site at different times. Eighty (80) respondents with the same characteristics of the
study population were randomly chosen and copies of the questionnaire administered to each
member. A Cronbach’s Alpha coefficient was used and the R c obtained for the four constructs range
between .711 and .720 > .05. This confirmed the internal consistency and reliability of the
instrument for data collection. Karl Pearson Product Moment Correlation Co-efficient and One -
way ANOVA technique were the analysis technique used with the aid of SPSS (IBM version 21).
The relationship between performance evaluation of responsibility centres of conglomerate and cost
and management accounting in Nigeria were expressed in the equation as: RCPE =ƒ(CMA).
Therefore, the model for hypothesis 5 (H05) which states that the relationship between
responsibility centre performance evaluation and
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cost and management accounting is not significant, used for multivariance analysis was specified and
measured by the linear equation 5
CMA = β0 + β1(CRC) + β2(RRC) + β3(PRC) + β4(IRC) + ε----------------- (5)

RCPE = Responsibility centres performance evaluation covering the sub variables of the dependent CRM,
RRC, PRC, IRC. Where:
CRC = Cost responsibility centres;
RRC = Revenue responsibility centres;
PRC = Profit responsibility centres; and
IRC = Investment responsibility centres.
CMA = Cost and Management Accounting covering Cma1, Cma2, Cma3, Cma4.
β0 = Intercept coefficient;
β1 to β3 = Standardized correlation coefficient for each of the independent variable.
ε=Random disturbance terms assumed to be normally distributed with mean).
4.0 DATA ANALYSIS, RESULTS AND DISCUSSION OF FUNDINGS.

696 copies of questionnaire were administered to the participants and 586 were received and analyzed.
Marketing and Sales Department has least with 80% response rate while purchasing and Warehousing
department has the highest with 89%. The total average response rate was 84% which is considered adequate
for the analysis. Summary of copies of questionnaire distributed and returned is shown in Table 2.
Table 2 Summary of Copies of Questionnaire Distributed and Returned
Departmental No. Valid No. Returned No. Not

Management Staff Distributed Returned
( Top, Meddle and qty % DG JH TC UA TVN RR NN NNR%
Lower) P N C R % R
Subsidiary GM/MD 62 100% 10 9 11 21 51 82% 11 18%
Finance / Accounts 100% 42 27 30 40
Dept. 162 139 86% 23 14%
Marketing/Sales Dept 97 100% 21 23 13 21 78 80% 19 20%
Production/ Assem. Dept. 157 100% 43 30 12 42 127 81% 30 19%
Purchasing/Wareh. Dept. 118 100% 29 30 20 26 105 89% 13 11%
Strategic Business Unit. 100 100% 15 21 12 38 86 86% 14 14%
Total 696 100% 160 140 98 188 586 84% 110 16%
Key: TVNR =Total Valid No. Returned, NNR = No. Not Returned, RR% = Response Rate %
Source: Researcher’s Field work (2017)
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Descriptive statistics of hypothesis 1 to 4.
The descriptive statistics of hypotheses 1 to 4 was tested using One-way Analysis of variance
(ANOVA). The interpretation scale is: 0 -3.49 = Low opinion; 3.50 -5.49 = Average opinion and
5.50 - 7.00 = High opinion (Okpala, 2017). Hypothesis 1: There is no significant relationship
between cost centre performance evaluation and cost and management accounting. Table 3
indicated that the average perception of each Nigerian conglomerate were 4.45, 5.45, 4.58, and 5.21
respectively signifying a mixed perception in each category on the relationship between cost centre
performance evaluation (CRC) and cost and management accounting (cma1). The overall average
perception of all categories obtained when collapsed all the items gave a mean score of about 5.12
with the F- statistics of 7.25. The differences in means perception of the fours conglomerates were
statistically significant with P-value = .000 <.05. The overall mean score of respondents’ opinion
between the Cma1 and CRC of 5.12, which fell on “agree option” in the scale of 1 to 7 on the
research instrument. Cost and management accounting is perceived to be averagely related to cost
centre performance evaluation in Nigerian conglomerates. Therefore, performance evaluation using
costing and management accounting system should be encouraged in the cost responsibility centres.
This would assist management in assessing the cost effectiveness of the cost centre. The ANOVA
result enabled the achievement of the research objective 1.
Table 3 One - way ANOVA results of Hypotheses 1
Participants N Mean Standard
Deviation
Dangote Group (DG), 160 4.4567 1.5449
John Holt Plc (JHP), 140 5.4521 1.6125
Transnational Corp. of Nigeria (TCN), 98 4.5791 1.1349
United Africa Co. of Nigeria (UAC). 188 5.2143 1.5233
Total 582 5.1233 1.5768
F- statistics 7.254
P-value 0.000
Source: Researcher’s field work (2017)
Hypothesis 2: Revenue centre performance evaluation does not have significant association with
cost and management accounting. The average perception of each Nigerian conglomerate were
6.40, 5.93, 5.83, and 6.70 respectively indicating a high perception in each category on the
relationship between revenue centre performance evaluation (RRC) and cost and management
accounting (cma2) as shown in Table 4. The overall average perception of all categories obtained
when collapsed all the items gave a mean score of about 6.26 with the F- statistics of 9.26. The
differences in means perception of the fours conglomerates were statistically significant with P-
value = .000 <.05. Therefore, cost and management accounting is perceived to be strongly related to
revenue centre performance evaluation in Nigerian conglomerates on the ground that the overall
mean score of respondents’ opinion between the Cma 2 and RRC is 6.26. This falls on “strongly
agree” option in the scale of 1 to 7 on the research instrument. The
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use of costing and management accounting system in revenue centre performance evaluation should be
supported by central management in the Nigerian conglomerates. This would assist management in
appraising the revenue generation power of the revenue centre. The ANOVA result enabled this study to
achieve of the research objective 2
Participants N Mean Standard Deviation
Dangote Group (DG), 160 6.4000 1.2149
John Holt Plc (JHP), 140 5.9312 1.3655
Total 582 6.2559 1.2234
F- statistics 9.259
P-value 0.004
Source: Researcher field work (2017)
Hypothesis 3: The relationship between profit centre performance evaluation and cost and
management accounting is not significant. Table 5 indicated that the average observation of each
Nigerian conglomerate were 6.87, 5.83, 6.81, and 6.49 correspondingly signifying a very high
perception in each category on the relationship between profit centre performance evaluation (PRC)
and cost and management accounting (cma3). The overall average perception of all categories
obtained from collapsing all the items gave a mean score of about 6.51 with the F- statistics of 8.13.
The differences in means perception of the fours conglomerates were statistically significant with P-
value = .003 < .05 which fell on “strongly agree option” in the scale of 1 to 7 on the research
instrument. The perception of this result is that the variables are highly related in Nigerian
conglomerates. The result suggested that the performance evaluation using costing and management
accounting system to determine the profit of the responsibility centres of Nigerian conglomerates
should be maintained. This would assist management in the viability the strategic centre. The
ANOVA result enabled the achievement of research objective 3
Participants N Mean Standard Deviation
Dangote Group (DG), 160 6.8751 1.2989
John Holt Plc (JHP), 140 5.2342 1.1005
Total 582 6.5055 1.2540
F- statistics 8.126
P-value 0.003
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Hypothesis 4: There is no significant relationship between investment centre performance
evaluation and cost and management accounting. Table 6 point out that the average perception of
each Nigerian conglomerate were 6.44, 6.54, 6.43, and 6.61 respectively indicated a high perception
in each category on the relationship between investment responsibility centre performance
evaluation (RCPE) and cost and management accounting (cma 4). The overall average perception of
all categories obtained when collapsed all the items, gave a mean score of about 6.62 with the F-
statistics of 10.01. The differences in means perception of the fours conglomerates were statistically
significant with P-value = .000 <.05 which fell n “agree option” in the scale of 1 to 7 on the
research instrument. The suggested that cost and management accounting system should be used in
the investment responsibility centres of conglomerates to assist management in proper capital
investment appraisal and the determination of NPV in the centre. This would ensure that projects
with negative net present value are not initialed to loss of investable funds. The ANOVA result
enabled the achievement of the research objective 4.

Participants N Mean Standard
Deviation
Dangote Group (DG), 160 6.4432 1.3269
John Holt Plc (JHP), 140 6.5355 1.1785
Total 582 6.6157 1.3980
F- statistics 10.011
P-value 0.001
The result of the bivariate analyses using Karl Pearson Product Moment Correlation Co-efficient of
hypotheses 1 to 4, in Table 7, showed that the R values for the four constructs are: CRC =.621,
RRC =.732, PRC = .743, and IRC = .757 respectively. This indicated independent variable and sub
variables of the dependent variables positive related. It also revealed that the relationships are
statistically significant as CRC = .000 < .05; RRC = .004 < .05; PRC = .003 < .05 and IRC = .001
< .05. Therefore, the null hypotheses 1 to 4 were rejected and the alternative hypotheses not
rejected. This result confirmed the report of the descriptive statistics in Table 3, 4, 5, and 6 and they
are in agreement with the findings of Mojgan (2012); Atu et al, (2014); Jaradat, Alazzam, and
Rumman (2016). The overall R value in Table 8 of the multivariance analysis is .876 which showed
that there is a high positive relationship between responsibility centres performance evaluation and
cost and management accounting system in Nigerian conglomerates. The R2 of .779 means that
CMA is responsible for 78% variation in the RCPE. This is confirmed by the F-statistics of 14.123.
Table 9 revealed that the relationship between the variables is significant as p = .000 < .05. The
significance of the model at 0.05 level was confirmed by the t-statistics of 4.995 in table 10. Based
on this result, null hypothesis is hereby
Page 50
rejected and the alternative hypothesis not rejected. The simple linear equation can be expressed as
CMA = β5 (RCPE) and using the estimated figures, CMA = 4.194 + 0.279 (RCPE). This implies
that a unit increase in CMA will propel about .279 increases in RCPE. The estimate confirmed the
positive relationship between CMA and RCPE. It also shows that is R = 0.279 > 0 is consistent with
the ‘a prior expectation’. The finding of hypothesis 5 is in agreement with the reports of Mojgan
(2012).
Summary of Findings, Conclusion and Recommendation

The summary of the study findings showed: (i) that cost and management accounting is the
appropriate financial tools for responsibility centre performance measurement, (ii) that cost and
management accounting can be used to determine each responsibility centre manager's contribution
towards the achievement of organizational set goals. This is achieved through accumulation of costs
and revenue of individual responsibility centre and reporting same to the management, (iii) all
Nigerian conglomerates have fully adopted the fundamentals of responsibility accounting system in
the evaluation of its centre performance. This has helped the central management of the respective
organizations in setting target and monitoring same (Agyei-Mensah, 2017), (iv) that each
conglomerates prepares budgets efficiently, analyze cost on the basis of responsibility which assists
the central in reporting performance each centre performance as well as the that of the whole
organization, (v) that responsibility centre accounting has helped management in the targets
achievement of its designated centres, and (vi) Cost and management accounting would also enable
each centre and the organization as a whole to prepare budget and manage the entire organization
through management by objective as well as after the budget analysis management by exemption.
The study contributed conceptually, theoretically and empirically by examining the
relationships among the independent and dependent variables and their aggregate as well as the sub
variables of the dependent: performance evaluations of cost centre, revenue centre, profit centre,
and investment centre and cost and management accounting in Nigeria conglomerates. The study
empirical evidence indicated that the relationship between each responsibility centre and cost and
management accounting is significant which addressed the identified gaps. These results opposes
the report of Akenbor and Nwaiwu (2013) but agreed with the findings of Mojgan (2012); Opoku-
Asante (2013); Atu et al. (2014); Oyerogba, Olaleye, and Solomon, (2014); Jaradat, Alazzam, and
Rumman (2016); Agyei-Mensah (2017).
The study recommended that the use of cost and management accounting practice in the
evaluation of responsibility centre’s performance should be intensified and up held. This would
assist management in the assessing the cost effectiveness of the cost centre, revenue generation
power of the revenue centre, determination of the profit level of the profit responsibility centres and
ensure that projects viability before initiation to loss of investable funds of the investment centres. It
was suggested that other researchers should conducted further studies to replicate and confirm the
results in other sub sectors of the economy not covered by this study such as chain and departmental
stores, and other organizations with
Page 51
several branches and subsidiaries in the Nigeria. The results of this study are in accordance with the
a priori expectations.
Table 7 Correlations
Staff Members CMA CRC RRC PRC RC
CRC Pearson
.621* 1
Correlation
Sig. (2-tailed) .000
N 582 582
RRC Pearson
.732* .567* 1
Correlation
Sig. (2-tailed) .011 .000
N 582 582 582
PRC Pearson
.743** .578* .592* 1
Correlation
Sig. (2-tailed) .000 .002 000
N 582 582 582 582
IRC Pearson
.757** .640* .587** .574* 1
Correlation
Sig. (2-tailed) .002 .002 .001 .000 .000
N 582 582 582 582 582
** Correlation is significant at the 0.01 level (2-tailed).
* Correlation is significant at the 0.05 level (2-tailed).
Source: Researcher Field Survey, 2017
Table 8 Model Summary (b)

R R Adjust Std. Change Statistics Durbin-
Squar ed R Error of Sig. F R F df2 Watson
e Square the Square Change
Model Estimate df1
1 .876 a
.779 .702 .189 .258 .763 4 1 585 1.102
a Predictors: (Constant), cma1, cma2, cma3, cma3
b. Dependent Variable: RCPE (CRC,RRC,PRC,IRC)
Source: Field Survey, 2017
Table 9: ANOVAa
Model Sum of Squares df Mean Square F Sig.
Regression 1.271 1 1.271 14.123 .000b
1 Residual 5.674 585 .010
Total .945 586
a. Dependent Variable: RCPE
b. Predictors: (Constant), CMA
Page 52
Table 10: Coefficientsa

Unstandardized Standardized t Sig.
Coefficients Coefficients
Model B Std. Error Beta
(Constant) 4.194 .060 13.238 .002

1
a
RCPE .279 .011 .876 4.995 .000
a. Dependent Variable: RCPE
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WEST AFRICAN JOURNAL OF BUSINESS AND MANAGEMENT SCIENCES

FACULTY OF BUSINESS ADMINISTRATION

DIVISIONAL PERFORMANCE EVALUATION: THE RELEVANCE

OKPALA, Kenneth Enoch1 (corresponding Author)

AKINYOMI, Oladele John 2

Production Marketing Finance & Purchasing Technical &

Figure 1: Functional Structure

Product A Product B Product C

Other functions Other functions Other functions

Figure 2: Divisional Structure

Cost management accounting

Staff Member DG JHP TCN UAC

CMA = β0 + β1(CRC) + β2(RRC) + β3(PRC) + β4(IRC) + ε----------------- (5)

4.0 DATA ANALYSIS, RESULTS AND DISCUSSION OF FUNDINGS.

Table 2 Summary of Copies of Questionnaire Distributed and Returned

Departmental No. Valid No. Returned No. Not

Table 6 One - way ANOVA results of Hypotheses 4

Summary of Findings, Conclusion and Recommendation

Table 8 Model Summary (b)

Table 10: Coefficientsa

(Constant) 4.194 .060 13.238 .002

Lucey, T. L. (2003). Management Accounting (5 ed.), London, Continuum International Publishing

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