Adoption of Cost and Management Accounting Techniques. Survey Study on Selected Manufacturing Firms In and Around Addis Ababa, Ethiopia

TABLE OF CONTENTS

ACKNOWLEDGEMENT

ABSTRACT

TABLE OF CONTENTS

LIST OF TABLES

ACRONYMS

CHAPTER ONE
INTRODUCTION
1.1. Background of the Study
1.2. Back ground of Manufacturing firms in Study Area
1.3. Statement of the Problem
1.3.1. Research Questions
1.4. Objectives of the Study
1.4.1. General Objectives
1.4.2. Specific Objectives
1.4.3. Research Hypothesis
1.5. Significance of the Study
1.6. Scope or Delimitation of the Study
1.7. Organization of The paper

CHAPTER TWO
REVIEW OF RELATED LITERATURES
2.1. Theoretical Review
2.1.1. Cost and Management Accounting Purposes and Evolution
2.1.2. Traditional Cost and Management Accounting Techniques
2.1.2.1. Standard Costing
2.1.3. Comparison of Traditional Costing Techniques
2.1.4. Modern Cost and Management Accounting Tools
2.1.4.1. Activity Based Costing / Activity Based Management
2.1.4.2. Target Costing
2.1.4.3. Life Cycle Costing or Life Cycle Management
2.1.5. Cost and Management Techniques for Quality and Performance Measurement
2.1.5.1. Kaizen Improvement or Management
2.1.5.2. Just in Time (JIT)
2.1.5.3. Balanced Sore Card
2.2. Empirical Review of Literature
2.2.1. Empirical Studies from The World Countries
2.2.2. Empirical Studies from Ethiopia
2.2.3. Research Gap

CHAPTER THREE
3. RESEARCH DESIGN AND METHODOLOGY
3.1. Research Design
3.2. Source of Data and Data Collection Techniques
3.2.1. Primary Data
3.2.2. Secondary Data
3.2.3. Data Collection Instruments
3.3. Target Population and Sampling Methods
3.3.1. Sample Design
3.3.2. Sample Size and Sampling Techniques
3.4. Method of Data Analysis and Presentation
3.4.1. Variables Included in Model Specification

CHAPTER FOUR
RESULT AND DISCUSSION
4.1. Introduction
4.2. Analysis of Finding Related to Respondent Firms Characteristics/profiles
4.3. Analysis of Results for Respondent Employee’s Profile
4.4. Descriptive Statistics Analysis
4.4.1. Cost and Management Accounting Techniques Adopted and implemented
4.4.2. Purpose of Cost and Management Accounting information for Managers
4.4.3. Results and Analysis for Effect of Adopting CMATs on Financial Performance.
4.4.4. Results and Analysis for Effect of Adopting CMATs on Companies Operating Efficiency.
4.5. Inferential Statistics Results
4.5.1. Factors affecting the adoption of cost and management accounting techniques in selected manufacturing firms in and around Addis Ababa.
4.5.2. Correlation results and analysis
4.5.3. Tests for Multicollinearity
4.5.4. Multiple regression analysis results and discussion
4.6. Hypothesis Testing and Results
4.6.1. Technological Advancement and Adoption of Cost and Management Accounting Techniques
4.6.2. Competition among firms and Adoption of Cost and Management Accounting Techniques
4.6.3. Company size and Adoption of CMATs
4.6.4. Age of Company and Adoption of CMATs
4.6.5 Level of Employees Education and Adoption of Cost and Management Accounting Techniques:
4.6.6. Employees Experience and Cost and Management Accounting Techniques
4.6.7. Implementation Cost and Adoption of Cost and Management Accounting Techniques
4.6.8. Availability of Management Support and Adoption of Cost and Management Accounting Techniques:

CHAPTER FIVE
CONCLUSION AND RECCOMENDATION
5.1. Major Finding and Implications
5.2. Recommendation
5.3. Limitation of The Study
5.4. Area of Future Research

REFERENCES

APPENDIX

Survey Questionnaires

ACKNOWLEDGEMENT

First and foremost, I would like to thanks the Almighty Allah for every blessing that he enriches me with in my whole life. To the next, I would have deeply indebted to my Advisers Dr. Deresse Mersha L. (PH.D) and Mr. Mohammed Getahun. (MSC.) for their influential support in motivating and inspiring me by providing constructive comments, modifications to my effort & suggestions till the completion of this thesis. In addition, I would like to thanks my parents specially My Mom & Dad for their everlasting guidance in strengthening and supporting me to track on right path till this time. Further, I indebted for my perpetual friend jamo for her countless pick-me-up when I was exhausted with this study. finally, I would like to say Thanks!!! Thanks!! Thanks! everybody who were in position of supporting me by any means you can during span of conducting this thesis.

ABSTRACT

In today’s competitive world of business, having accurate information is the key factor in distinguishing between the loser and the winner. Cost and management accounting embraces a range of techniques essential to all phases of product life cycle from providing reliable information for strategic decision making to managing construction and maintenance of costs. This study attempts to investigate the degree of Adoption of cost and management accounting techniques in Selected Manufacturing companies in and around Addis Ababa, Ethiopia. Further, factors affecting the adoption of those techniques were examined. Finally, the perceived effect of adopting these techniques on the company’s operating efficiency and financial performance were evaluated. In doing so, Descriptive and explanatory research design were used for achieving multi-dimensional objectives of this study. Simple Proportional Allocation stratified sampling Technique was employed for determining the sample size from each stratum of manufacturing firms. Total sample of 91 manufacturing firms in and around Addis Ababa were included in this study & structured survey Questionnaires were distributed to each of them. Consequently, 65 usable Questionnaires were collected back and used for analysis and discussion of results. The finding of this study revealed that, currently selected Ethiopian manufacturing firms in study area are gradually adopting cost and management accounting techniques. The widely adopted cost and management accounting tool was budgeting control techniques with weighted mean average of 3 .94 and standard deviation of .634. Throughput accounting was the least adopted techniques by respondent firms. Further, multiple regression model analysis result indicated that, 80.8% of variation in adoption of cost and management accounting techniques by manufacturing firms in and around Addis Ababa was explained by factors included in the model. finally, finding of this study indicated that, there was significant effect of adopting cost and management accounting techniques on sample manufacturing firms operating efficiency and financial performance. The researcher recommended the management of Ethiopian manufacturing firms to give due consideration for adoption and implementation of sophisticated cost and management accounting techniques since it helps them to compete successfully and improve overall performance of their organization.

Key words : Cost and Management Accounting Techniques, Cost Accounting, Management Accounting, Ethiopian Manufacturing firms.

LIST OF TABLES

Table i: Lists of total firms and sample size from each stratum

Table ii: List of Variables, Symbols and measurement.

Table iii: Sample firms’ profile analysis

Table iv: Respondent's Employees profile

Table v: CMATs adopted and Implemented by selected Manufacturing firms

Table vi: Analysis of result obtained for purpose of adopting CMATs.

Table vii: perceived effect of Adopting CMATs on company's Financial Performance.

Table viii: Perceived effect of Adopting CMATs on Companies Operating Efficiency.

Table ix: Pearson product moment Correlation Analysis

Table x: Collinearity Statistics results

Table xii: ANOVA test results for Multiple Regression

Table xiii: Coefficients Results for Multiple Linear Regression Model

Table xiv:Summary of finding and Hypothesis Testing

LIST OF FIGURES

Figure 1: Balanced Score Card’s Four Perspectives of Performance Measurement.

Figure 2: Classification of Manufacturing firms as per ISIC.

Figure 3: Size of sample manufacturing firms included in the study.

Figure 4: Interval of Capital for selected respondent firms since their establishment

Figure 5: Age of firms since its establishment:

Figure 6: Sex of respondents

Figure 7: Age of respondent employees

Figure 8:Current Position held by Respondent employees

ACRONYMS

AACCSA Addis Ababa Chamber of Commerce Sectoral Association

ABC: Activity Based Costing

ABM: Activity Based Management

AMATS: Advanced Management Accounting Techniques

BSC: Balanced Score Card

CIMA: Chartered Institute of Management Accounting

CMATs Cost and Management Accounting Techniques

CSA Central Statistical Agency

CVP: Cost – Volume Profit Analysis

ERCA: Ethiopian Revenue and Custom Authority

IMA: Institute of Management Accounting

ISIC: International Standard of Industry Classifications

JIT: Just in Time

LCPCM: Life Cycle Product Costing Management

MAP: Management Accounting Practices

MBE: Management by Exemption

PLC: Private Limited Companies

SCM: Strategic Cost Management

SME: Small and Micro Enterprises

TCM: Target Costing and Management

TQM: Total Quality Management

CHAPTER ONE

INTRODUCTION

1.1. Background of the Study

Ethiopia’s manufacturing sector is among the key productive sectors of the economy identified under GTP I (2010-2015) which can spur economic growth and development because of its immense potential for wealth creation, employment generation and poverty alleviation (AACCSA, 2015). The manufacturing sector makes an important contribution to the Ethiopian economy and employs about 173 thousand people in the year 2014/2015. The sector had about 2,610 manufacturing establishments in the same year and for this study purpose they are divided into eight broad sub-sectors namely food and beverage products, textile and apparel products, leather and leather products, wood and pulp products, chemical and chemical products, rubber and plastic products, other non-metallic minerals products and metal and engineering products industries (AACCSA, 2015).Those firms have different objectives to be achieved like; profit maximization, plant diversification, proper utilization of resource and filling customer needs. In doing so, the necessity of cost and management accounting tools is increased for effective and efficient achievement (Tessema, 2012). The reasons for this are; the domestic and global competition getting severer due to globalization, decreasing profit margins, increasing input prices due to the tightening energy sources, economic crises and the like. (Rao, 2015). As stated by Rao and Beg (2015) companies operating in developing countries have also begun to implement cost and management accounting practices which were first adopted by companies operating in developed countries. Parallel to these developments, research studies which have been conducted initially in developed countries are followed by the studies conducted in developing countries (Rao, 2015). As a result of industrialization, the need for accounting profession was emerged and then business managers and management accountants needed in private companies were mostly transferred from State Economic Enterprises (Aysan, 2006).

In the last decades, cost and management accounting has gained importance as private sector developed in almost all areas. Large industrial enterprises set up cost and management accounting segments in accounting departments (Aysan, 2006). Furthermore, curricula of faculties of economics and administrative sciences included cost accounting and/or management accounting along with financial accounting. The disciplines are specifically different in their definition but interconnected in the organization for useful and purposeful achievement.

Management accounting is the part of the management process that is focused on adding value to organizations by attaining the effective use of resources in dynamic and competitive contexts. It contains all the information which is officially gathered to support the decision making in production. It is used for internal purposes and therefore different from financial accounting which is used for reporting for external stakeholders (Andreas, 2013). Cost accounting is the process of accumulating and accounting for the flows of costs in a business. It is defined as a technique or method for determining the cost of a project, process, or thing through direct measurement, arbitrary assignment, or systematic and rational allocation. The appropriate method of determining cost often depends on the circumstances that generate the need for information. This can be information such as material cost, production cost, product cost, investment calculations, and budget (Drury, 2001).

Manufacturing firms highly dependent on information released from cost and management accounting personnel such as; details information regarding cost of raw material, cost of labor force and other inputs has to be clear for the firm’s management before starting the operations. Further, manufacturers are surrounded by different decisions which need powerful and tactical human and system for selecting the best alternatives (Ahid & Augustine, 2012). A critical managerial function is decision making. Those decisions may make from; marketing, production, financial and non-financial perspectives. A primary objective of decision making is to achieve optimum utilization of the business’s capital or resources. In management accounting, the objective is not necessarily to make the best decision but to make a good decision. Because of complex interacting relationships, it is very difficult, even if possible, to determine the best decision. Management decision making is highly subjective. Whether a decision is good or acceptable depends on the goals and objectives of management. Consequently, a prerequisite to decision making is that management have set the organization’s goals and objectives. For instance, management must decide strategic objectives such as the company’s product line, pricing strategy, quality of product, willingness to assume risk, and generate profit (Ahid & Augustine, 2012)

In setting goals and objectives, it is useful to distinguish between strategic and tactical decisions. Strategic decisions are broad based, qualitative type of decisions which include or reflect goals and objectives. Strategic decisions are non-quantitative in nature. Strategic decisions are based on the subjective thinking of management concerning goals and objectives. Tactical decisions are quantitative executable decisions which result directly from the strategic decisions. The distinction between strategic and tactical is important in management accounting because the techniques of management accounting pertain primarily to tactical decisions. Management accounting does not typically provide techniques for assisting in making strategic decisions. Once a strategic decision has been made, then a specific management tool can be used to aid in making the tactical decision. For example, if the strategic decision has been made to avoid stock outs, then a safety stock model may be used to determine the desired level of inventory (Hilton et.al., 2000).

The classification of decisions as strategic and tactical logically results in thinking about decisions as qualitative and quantitative. In management accounting, the approach to decision making is basically quantitative. Management accounting deals with those decisions that require quantitative data. In a technical sense, management accounting consists of mathematical techniques or decision models that assist management in making quantitative type decisions. For any type of decision discussed above, adoption and implementation of cost and management accounting techniques are important for efficient and effective achievement of organization’s objective (Hilton et.al., 2000). Some of those modern cost and management accounting techniques needed to be adopted by manufacturing firms for purpose of reducing and managing their cost includes; Activity based costing/management, Target costing/management, Just-in time, Life-cycle costing, Kaizen costing or management, and so on. There are also other cost and quality maintaining tools like, Business process Re-engineering, Balanced score card and Total quality management etc. (Drury, 2001). The purpose of this study is to assess the adoption of these cost and management accounting techniques by manufacturing firms in and around Addis Ababa, Ethiopia.

1.2. Back ground of Manufacturing firms in Study Area

The Manufacturing sector comprises establishments engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products. The establishments are often described as plants, factories, or mills and typically use power-driven machines and materials-handling equipment. They include all intermediate processes required for the production and integration of a product's components (CSA, 2015/16).

Manufacturing organization is a wealth-creating sector of an economy, and closely connected with engineering and industrial design and provides important material support for national infrastructure. It involves the mechanical or chemical transformation of materials or substances into new products. It makes products from raw materials by the use of manual labor or machines and is usually carried out systematically with a division of labor (Andreas, 2013). In a more limited sense, manufacturing is the fabrication or assembly of components into finished products on a fairly large scale (AACCSA, 2015). Ethiopian manufacturing sector contribute for export, employment and national output. The sector accounts for 70% of the industrial sector. Within the manufacturing sector, the agro-processing subsector (food and beverage subsector here in after) is the largest subsector, accounting for 36% of the total gross value of production (GVP) and 38% of the value added at basic price (VAMP) of large and medium scale manufacturing industry (CSA, 2013/14).

The number of manufacturing industry which was 408 in 1980/81 increased to 2,610 in 2014/15 (AACCSA, 2015). Declining growth between 1980 and 1991(408 to 283), lower growth between 1991 and 2001 (283 to 909), modest growth between 2001 and 2015/16 (909 to 2610). Among the total large and medium manufacturing processors, of 2,610 manufacturers, 670 are establishments of food and beverage subsector and employed more than 67,000 people, followed by non-metallic mineral products, metal and engineering products, wood and paper products, rubber and plastic products, chemical and chemical products, leather and leather products and textile products industries with 544, 433, 196, 154, 143, 141 and 104 total establishments for each and 17,230, 13,238, 14,064, 10,984, 9,801, 14,019 and 19,233 total jobs created again by each categories respectively, for the year 2013/2014(2006 E.C.) (AACCSA, 2015).

For purpose of this study the level of Adoption of Cost and management accounting techniques by registered manufacturing firms in and around Addis Ababa city Administration were considered. Total population of this firms according to secondary data received from Central Statistical Agency was 1017 until the end 2015. Classification and the total number of establishments of each category from which this study sample were received were summarized as follow; Food and Beverages, Textile and apparel products, Leather and leather products, Wood and pulp products, Chemical and its products, Rubber and plastics, Non-metallic products and Metal and engineering products with their number establishment’s 395,45, 20, 95, 40, 120, 140 and 162 respectively (AACCSA, 2015).

1.3. Statement of the Problem

Among business organization classified in the world; Manufacturing firms are well known in terms of their contribution to one countries economic development and profitability size generated within a given period of time. In Ethiopia also, manufacturing sector is among the key productive sectors of the economy identified under GTP I (2010-2015) which can spur economic growth and development because of its immense potential for wealth creation, employment generation and poverty alleviation(AACCSA, 2015). Though sector has such positive advantages, there are number of challenges and difficulties that hinders the achievement of the required objectives. Some of those factors in manufacturing firms include; domestic and international competition due to globalization, increase in price of input due to tightening energy sources, technological development, experience and level of education of employees, economic crises etc. (Rao, 2015).

In today world of competition, managing and controlling such factors; create the need of Cost and Management Accounting Techniques in manufacturing firms more than ever. Because, Manufacturing firms were highly dependent on information released from cost and management accounting personnel. For instance, details information regarding cost of raw material, cost of labor force and other inputs has to be clear for the firm’s management before starting the operations. in addition to this, manufacturers are surrounded by different decisions which need powerful and tactical human and system for selecting the best alternatives (Tessema, 2012).

The management of organization is responsible for making various decision after relevant information were provided by responsible bodies whose supported by Cost and Management Accounting techniques adopted. For that reason, companies operating in developing countries like Ethiopia are also liable for adopting and implementing cost and management accounting tools which initially adopted by developed countries in order to make effective and significant decision (Tessema, 2012). Cost Accounting as information basis, support the manager of organization by providing relevant information that help them for purpose of planning, controlling and decision making. Over last few decades gathering relevant information which satisfy need for management of the business for making decision has been emphasized as the fundamental task of cost accounting (Panciu, 2011). The researcher strived to assess whether Ethiopian manufacturing companies in study area are implementing cost and management accounting techniques for; evaluating efficient utilization of their resource, measuring overall operational efficiency and financial performance. To the researcher knowledge, there are insignificant number of studies undertaken regarding adoption and practice of cost and management accounting techniques in Ethiopian manufacturing firms. Some of reviewed literatures around this area were as follow starting from foreign countries experience to that of our country since it become easy for identifying the gap of the study.

According to empirical study conducted on Turkish manufacturing companies the adoption and practice of cost and management accounting tools is relatively high (Uyar, 2010). The other study was undertaken in Sweden which designed to investigate the informational relationship between Management accounting and operations management in companies. The Results from this research showed that there are many factors to be considered when choosing and designing an appropriate Management accounting system. Contextual factors which include market, manufacturing strategy, Technology, and size of organization were considered (Andreas, 2013).

In the other related literature, Mazumder, (2007) carried out a study on Application of Management accounting techniques in decision making by Manufacturing Firms in Bangladesh. They found out those modern techniques such as Activity Based Costing, just in Time, Total Quality Management, Process Reengineering and Theory of constraints are not used in public and private sector manufacturing enterprises, but a few multinational corporations use the modern techniques particularly Just- in- Time system and Total Quality Management. The final paper reviewed for concern of relating this thesis with evidence from foreign countries was conducted on cost and management accounting practice on Indian manufacturing companies and finalized with result which stated, the most widely used product costing method is job costing; and pricing decisions is the most important area where costing information is used. Furthermore, decreasing profitability, increasing costs and competition, and economic crises are among few factors which increase the perceived importance of cost and management accounting tools (Rao, 2015).

In Ethiopian case there are no such sufficient studies which directly related to the problem under study but the researcher made his best for identifying the Gap for this study. One of few literatures around this area was the study conducted on significance of Cost management tools for decision making in Ethiopian private limited manufacturing companies (Tessema, 2012). Findings of this study revealed 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 (Tessema, 2012).

Based on those empirical evidence, the researcher attempted to identify research gap from two angles. The first was modifying the problem stated in previous research which is about the significance of Cost management tools for decision making in to degree of Cost and management accounting techniques adoption and practice in Selected Ethiopian manufacturing firms & its effect on firms operating efficiency and financial performance. Secondly, examining some of the factors which affects the adoption and implementation of these techniques in selected manufacturing firms of Ethiopia by enlarging the sample size taken by Tessema, (2012) which incorporated only private limited companies from any manufacturing firms in and around Addis Ababa city regardless of ownership. To sum up, this study assessed the adoption of Cost and management accounting techniques in selected Ethiopian manufacturing firms by applying the experience of developed and other developing countries disseminated through online literatures. Further, the above research gaps were investigated by setting the following research questions and objectives;

1.3.1. Research Question s

The following are some of the basic questions helped as corner stone for success of this study

1. What are the cost and management accounting techniques adopted by Ethiopian selected manufacturing firms?
2. What are possible factors affecting the Adoption of cost and management accounting techniques in selected manufacturing firms?
3. What are the perceived effects of Adopting cost and management accounting techniques on selected manufacturing firm’s operating efficiency and financial performance?

1.4. Objectives of the Study

1.4.1. General Objectives

The overall objective of this study was examining the adoption and practice of cost and management accounting techniques in the operation of Ethiopian selected manufacturing firms for the last five years.

1.4.2. Specific Objectives

For purpose of executing the main objective of this study, the following particular objectives were formulated;

1. To assess the adoption of cost and management accounting techniques in selected manufacturing firms in and around Addis Ababa, Ethiopia.
2. To investigate the factors affecting adoption of this techniques in selected manufacturing firms of study area.
3. To evaluate the perceived effect of adopting cost and management accounting techniques on those firm’s operating efficiency and financial performance.

1.4.3. Research Hypothesis

The researcher estimated the relationship between dependent and independent factors included in this study by setting the following statement of supposition.

Technological Advancement and Adoption of Cost and Management Accounting Techniques

During early years, accounting systems were used and practiced by manual based approach which is traditional in nature and confirmed as insignificant system to organizational success (Khurram, 2014). But in today world, globalization equates almost all countries in the world by supplying the similar information through the technological advanced system (Bogale, 2013). In such competitive environment the use of sophisticated and modern system helps firms for efficient and effective achievement of their objectives (Askarany, 2006).Therefore, in this study the researcher also anticipated those manufacturing firms which have good access to modern relevant information and operated by using modern equipment might have more chance to adopt and practice cost and management accounting techniques than those firms that does not have that access. The researcher strived to investigate the relationship between technological advancement and adoption of cost and management accounting techniques by putting the following statement of supposition.

Ho 1: There is no significant relationship between Technological advancement and adoption of cost and management accounting techniques.

Ha 1: There is positive and significant relationship between Technological advancement and adoption of cost and management accounting techniques.

Competition and Adoption of Cost and Management Accounting Techniques

The goal of any business organization is maximization of profit (Andreas, 2013). Manufacturing firms have also the same aims.in doing so, there are different challenges faced by firms from which one is competition. A firm that fails to reduce costs as rapidly as its competitors will find its profit margins squeezed and its existence threatened. The competitive environment demands the development of sophisticated cost management accounting practices to keep cost down (Tessema, 2012). This implies if manufacturing firms cannot Compete generously other powerful competitors can kick out that firm from the operation. The researcher also supposed that, the more competent manufacturing firms has competitive advantages over other firms by adopting and implementing Cost and Management accounting techniques. The relationship between two variables was described as follows;

Ho2: Competition among the manufacturing firms cannot facilitates the adoption of cost and management accounting techniques.

Ha2: Competition among the manufacturing firms facilitates the adoption of cost and management accounting techniques”

The Size of Enterprises and Adoption of Cost and Management Accounting Techniques.

Size of company in this case was measured by selected firms’ total capital balance since establishment. The researcher anticipated that company’s size affects the firm’s ability of adopting cost and management accounting techniques. The researcher expects that the Large and medium manufacturing companies perform various activities in their normal working conditions than that of small scale firms. So availability of various activities may need various tool to manage and identify Value added activity from that of Non-value added activities (Bogale, 2013). So, researcher anticipate Company size have significant effect on adoption of cost and management accounting tools Thus, in light of the above theoretical grounds the researcher develops the following hypothesis;

Ho3: “The company size has no relationship with the adoption of Cost and Management accounting techniques” in selected manufacturing firms in and around Addis Ababa, Ethiopia.

Ha3: “The company size positively determines the adoption of Cost and Management accounting techniques” in selected manufacturing firms in and around Addis Ababa, Ethiopia.

Age of Firms versus Adoption of Cost and Management Accounting Techniques

The researcher expects that the newly established manufacturing firms has low chance of adopting cost and management accounting techniques compared to that of early formed organization. As the age of firms increased the organizations size as well as complexity of activities also increased (Karanja et al., 2012). As a result, management of firms need to acquire the techniques to overcome such sophisticated job, from which Cost and management accounting techniques are considered (Saaydah & Khatatneh,2014). So adoption of those tools are positively related to the age of organization. The following hypothesis is developed for this theoretical supposition:

Ho4: Firms duration in the operation has no significant influence in affecting the adoption of CMATs.

Ha4: Firms duration in the operation has significant influence in affecting the adoption of CMATs positively.

Education Level of Employees Versus Adoption of Cost and Management Accounting Techniques

knowledge is the most powerful weapon which resulted mostly from education (Anderson, 2007). So, organization which operated by educated man power expected to achieve higher and favorable performance than organization operated by illiterate personnel. As educated man power increases the interest for seeking new information is increased (Adler et al., 2000). For instance, Manufacturing firms which operated by well-educated and skilled employees have high probability of maximizing its profit and achieving its objectives. The researcher also anticipates the Educational level of employees has positive and significant effect on adoption of Cost and management accounting techniques. The summary of this ideas are formulated as follows:

Ho5: Educational level of employees does not increase the adoption of cost and management accounting techniques in manufacturing firms.

Ha5: Educational level of employees increases the adoption of cost and management accounting techniques in manufacturing firms.

Employees Experience & Adoption of Cost and Management Accounting Techniques

Researcher anticipates that experience is also the other factors which affect the adoption of cost and management accounting techniques in positive side. Sometimes if you practice something you don’t know repeatedly the chance of knowing it is high (Anderson, 2007). For manufacturing firms also employees experience can bring new changes and new techniques like that of Cost and management accounting techniques. The researcher supposes that, manufacturing business which have well experienced human resource achieve its objective effectively. This statement restructured for sake of future testing in the following manner:

Ho 6: Employees experience is not determined the adoption of CMATs.

Ha 6: Employees experience has positively determined the adoption of CMATs.

Implementation Cost and Adoption of Cost and Management Accounting Techniques

When organization management decided to implement new strategy and techniques to their operation there are many requirements to be fulfilled (Adler et al.,2000). One element to be considered is cost of implementation. The researcher assumed that the cost of implementation has great influence on the adoption of Cost and management accounting techniques. The relation between two variables estimated to be strongly negative. hypothesized statement was indicated as follow;

H a7: High cost of implementation decreases the confidence of firm’s for adopting CMATs

Management Support and Adoption of Cost and Management Accounting Techniques

Availability of management support in organization facilitates the accomplishment of organization’s objectives in effective and efficient way ( Mugenda & Mugenda, 2003). Managers has various responsibilities including, planning and control of business activities, i.e. for the purposes of more qualitative and efficient operations and making various business decisions. Further, according to study by Thessaloniki, (2006) management of organization is responsible for giving various Training and rewards to encourage workers hence they properly maintain and continuously improve operating procedures in the working environment. This effort requires a combination of committed management who provide proper and continuous training, and develop a culture that bring sustain improvement from the shop floor to management of organization. But if manager does not act competitively the level of implementing different strategies to the organization operation become low (Mohammed &Augustine., 2012). The researcher supposed that Availability of management support has positive and significant influence on adoption of cost and management accounting techniques. The following are the statement of suppositions;

Ho8: Availability of management support has no relationship with adoption of CMATs.

Ha8: Availability of management support has positive and significant relationship with adoption of CMATs.

Specialist and Adoption of CMATs

Specialist in this study refers to skilled man power who are capable of providing relevant information regarding cost and management accounting techniques and changed those theories in to practice in the sample organizations. According to Mugenda & Mugenda, (2003), Achieving and sustaining competitive advantage in a dynamic and thoroughly uncertain environment necessarily requires sophisticated professional knowledge and skills, as well as designing an adequate information system requires quality support from responsible personnel (Anderson, 2007). For instance, management accountant, cost accountant, general accountant and other capable personnel in this areas. Supposed relationship between these variables formulated as follows;

Ha 9: Availability of specialist significantly affects the adoption of CMATs.

1.5. Significance of the Study

The researcher believes that the result of this Research project would have the following significances for all concerning bodies: Over all purpose of this study was contributing some bases to the upcoming researchers who want to undertake their study on the area of Cost and Management Accounting by placing some evidence regarding the recommended techniques applied by manufacturing firms for achieving their predetermined objectives. The other contribution is for development of manufacturing firms profit and shareholder worth. This means if more effective and efficient tools of cost minimization and management had been suggested after taking the experience of succeeded companies, profitability of organization had been resulted. Further, the result of this study would create Inter organizational relationship by sharing the most significant tools of cost and Management Accounting among the firms. Challenges and treats in practicing cost and management accounting techniques Would be minimized since factors affecting the adoption of those Techniques were discussed. The last but not least significance of this study was, it lets the Researcher acquire reward he deserves up on its’ accomplishment.

1.6. Scope or Delimitation of the Study

Due to various constraints like time; experience and location of case study; the researcher concentrated only on Adoption of Cost and Management Accounting Techniques in sample of Ethiopian Manufacturing Companies found in and around Addis Ababa City administration. So, in this study there is no detail of all Cost and Management Accounting Techniques and the study sample does not include the whole regions manufacturing firms.

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