Budget Variance and Analysis of Amana Ltd's Efficiency

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Prepare a monthly control budget report representing budget variance, flexible budget and
variances......................................................................................................................................3
2. Taking the control report in consideration, evaluate the efficiency of Amana Ltd. as an
organisation in the financial year 2020........................................................................................5
3. Give some suggestions to Amana’s CEO on areas of improvement.......................................7
PART-B...........................................................................................................................................7
1.Measure and assess with the help of an effective analysis, the possibility of whether Amana
Ltd as an organisation should initiate online selling through their own website or with the help
of a platform Amazon, taking in consideration all the necessary cost related factors.................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Budget is a form of an estimation which relates to the revenues and expenses that an
organisation decides upon a specified and decided time period. In this report an overview of
budget, monthly control reports, budget variance and original budget is explained with reference
to the budget of Amana Ltd (Ping, 2021). This report mentions about an organization of Amana
Ltd which is facing the issue of lower sales revenues in their operations which has disrupted their
performance. There is a discussion of the inefficiency and issues that the organisation is facing
due to which the revenues have been lesser than the standards which the company is expecting
upon. The other aspect in the report includes some recommendations that are provided to the
CEO of Amana Ltd to improve their efficiency and business productivity. The other part of the
below report evaluates the two different alternatives available to Amana Ltd and assist in
choosing the better option with an effective evaluation.
MAIN BODY
1. Prepare a monthly control budget report representing budget variance, flexible budget and
variances.
Monthly control reports: A Monthly management reports is a type of report which reviews,
evaluates and measures an organization’s financial as well as operational performance on a
monthly basis. This report helps the management of a business organization to track the data
from the past, present data with each other for the purpose of evaluating the business
performance and providing assistance in taking the accurate and effective decisions.
Original Budget: It refers to detailed and future looking combined budgets which assist to
understand the past data of the business organisation consisting both revenues and expenditures
that have occurred. It also aids to formulate the future revenues standards which the business
should aim to achieve with the set expenditures as per past expenses (Brusca, Labrador and
Condor, 2019).
Budget variance: It is an accounting term which explains the tasks and business instances due to
which there occurs a difference between the actual and the standard costs decided by the
company. The budget variances take place when the management compares the data from actual
budget as well as original budget and determines the deviations. It shows both the positive
deviations as well as the negative deviations from the targeted business numbers that the

organization aimed to achieve. A variance in the budget which is negative shows that the budget
has shortfall to the expectations and a positive budget variance shows that the revenues earned
are higher or the costs are lower than standard cost decided.
Flexible budget: A flexible budget is a type of budget which can be adjusted according to the
volume levels that the business decides upon. It is not like a static budget which is rigid on the
activity levels and volumes earned by an organization, a flexible budget adjusts according to the
changes taking place in the production volumes in the business and it flexes according to the
effective variation’s taking place in the business.
AMANA LTD
Monthly Control Report
Particulars
Original
Budget
Flexed
Budget Variances Variance
(%)
Revenue 2500000 1600000 -900000 -36.00%
Less: Cost of Goods Sold 800000 840000 40000 5.00%
Raw Material 250000 280000 30000 12.00%
Direct labor 400000 440000 40000 10.00%
Overheads 150000 120000 -30000 -20.00%
Gross Profit 1700000 760000 -940000 -55.29%
Less: Non- operating / Fixed
Expenses
350000 305000 -45000 -12.86%
Warehouse rental 200000 170000 -30000 -15.00%
Insurance 100000 100000 0 0.00%
Full time Warehouse
Supervisor salary
50000 35000 -15000 -30.00%
Net Profit 1350000 455000 -895000 -66.30%