Management Accounting Report on Amana Ltd's Efficiency and Online Business Strategy

This report evaluates Amana Ltd's efficiency in the fiscal year 2020 and provides suggestions to enhance the company's operations. It includes a monthly control report with original and flexible budgets, budget variance, and cost analysis. The report also assesses the feasibility of Amana's online business strategy, including establishing its own online shop or selling through Amazon. The report provides a cost analysis for both options and highlights the differences between them.

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
Create a monthly control report that includes the original budget, the flexible budget, and the
variations......................................................................................................................................3
Examine the control report and evaluate Amana Ltd.'s efficiency in the fiscal year 2020.........4
Make some suggestions for Amana's CEO on how to enhance the company.............................6
PART B...........................................................................................................................................7
Estimate after determining if Amana should accept to go online or establish its own online
shop, taking into account all of the company's expenditures.......................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
This report discusses the productivity of the Amana Ltd company in the accounting year
2020, and if there is any misunderstanding in the enterprise's task or a difficulty in performance,
provide recommendations to the company's CEO for enhancing the department's operations.
Thus, generally, this aids in the understanding of the organization's numerous challenges, and
then they design a strategy plan to fix the firm's disruption (Pelz, 2019). Its major focus is on the
business's expansion and development in general. In the second section of this report, examine
what moves Mr. Amana made to improve the firm's efficiency, as well as how Mr. Amana set up
his business on his own website or sold his items on Amazon, both of which caused costs for the
company. This report, on the other hand, incorporates the idea of a budget. It covers budget
analysis and determining the sum of costs and income incurred over a specific period of time. It
essentially expresses how much money a person can spend and save over a set length of time.
PART A
Create a monthly control report that includes the original budget, the flexible budget, and the
variations.
The study discusses budget planning in terms of creativity, flexibility, and deviations. First
and foremost, it's critical to comprehend the monthly control budget. In general, the budget
expresses information based on data from the company's payroll operations, whereas overhead
expenses represent changes in spending and their utility (Hiebl, and Richter, 2018). The
company's most significant component is to assist the owner or leader in analysing the sample of
investments made by the entrepreneur. The corporation may find it challenging to comprehend
its disclosure. This report also enables the organization's high department to construct the
department's operating cost maintenance and begin to understand the techniques for lowering
business costs and expenditures.
 Flexed budget: The budget also addresses the company's set of performance or
stages. In other words, the budget discusses the pricing structure that does not alter.
When a flexible budget is created, it is a back-to-back adjustment with firm
fluctuations in expenditure, and the benefit of this flexing budget is that it helps to
reduce money destruction. High opportunities and quick performance, on the other
hand, to transform the market and company environment. Data originality: This

budgeting idea aids in the understanding of previous expenditure and income data.
The budget is made with expenditures in mind, and it also aids in determining the
firm's new income.
Budget Variance: In general, this budget aids in determining the difference between the
actual and original budgets, as well as discussing the current state of the business and
demonstrating different improvements in the company's performance (Korhonen, and et.al.,
2020). To learn about the state of the fiscal year 2020. The workings of the initial budget,
flexible budget, and budget variations are shown in the table below.
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%
Examine the control report and evaluate Amana Ltd.'s efficiency in the fiscal year 2020.
The efficiency of Amana Ltd in the accounting year 2020 is clearly stated in the preceding
report. The above table's computation depicts the productivity of Amana Ltd's expected
activities, as well as how it responds to changes in the flexible budget, how it formulates the

costs and revenues of original data, and how it assists the firm in determining business
performance. Basically, there are a few different procedures that aid in determining the work of a
firm budgetary report's consequent duty:
 Costs that are readily traceable: This notion of budget is a key cost step that assists the
firm in determining the amount of money to be paid out and then preparing a budget
based on it in the near future. It will help the organisation analyse the issues that lead to
misunderstandings in the workplace while carrying out the actions necessary to meet the
company's budgetary objectives (Ghasemi, and et.al., 2019). This report primarily depicts
the firm's financial choices, which it makes on an annual basis rather than on a monthly
basis, and it may also be based on the determination of manufacturing expenditures,
material expenditures, and other expenses incurred while the company conducts its
business. However, if it creates a money-spending strategy, it is fundamentally different
from a financial plan. It can be prepared on a monthly basis by the company because
business expenses might occur at any moment. While they are carrying out the firm's
budgeted objectives. However, this monthly spending plan aids the organisation in
determining where money is spent most efficiently. The major aim of a business owner is
to find the optimal spending plan and strive to decrease the company's cash outflows and
expenditures. Essentially, the company may spend money on a beneficial activity rather
than on detrimental actions.
 Determine the high pay-out cost: If a company wants to improve the way it does tasks, it
should examine the areas where the company spends a lot of money and try to recover the
tasks that cost a lot of money and lower the company's revenue. This problem may be
remedied by paying less for unneeded tasks and focusing on generating more profit for
the company.
 Identify the areas in which there is a higher cost: The firm needed to identify the
numerous activities in which it incurred high costs, which was the cause of the poor
income value (Astuty, and Pasaribu, 2021). In general, businesses aim to improve their
cost structures and establish correct plans, and then they spend only on activities that are
beneficial to the firm and do not pose a risk to their profits.
The table above depicts the numerous types of areas in which Amana Ltd has to enhance
its performance. It clearly states that the corporation forecasted the original budget for the

accounting year 2020, yet the actual budget was lower than the original budget in a number of
categories, including:
 In the first instance, the income of the firm and its initial budget are shown in the
table above. It can demonstrate that the company's revenue exceeds its real budget.
Basically, it signifies that the corporation expected a big revenue in the accounting
year 2020 but received less, indicating that the company has to boost its sales rather
than pay out large costs.
 In the second point, the following table shows that the firm has made a large
investment in costs, as a result of which the company's gross profit has decreased in
comparison to the original budget.
 In the third case, it means that sales and gross profit are lower than expected, and as
a result, the net profit for the accounting year 2020 is lower as well. In 2020, the
company will spend more money on operating expenses and will be less focused on
profit, resulting in low productivity and a reduction in the company's capacity to
undertake activities with the achievement of goals and objectives.
Make some suggestions for Amana's CEO on how to enhance the company.
 The company's department has to generate more income since any company may make a
lot of money if it sells a lot of things and spends less money on activities. There is just
one element that affects the company's actual budget: poor sales. When sales are low and
costs are high, the company's net profit is reduced.
 Prepare a good budget plan: This is one of the most important steps in creating a budget
in advance because, before implementing any plan, a company must first develop the best
strategy and then move forward to implement that strategy into the business in order to
achieve the budgetary goals efficiently (Pasch, 2019). The chart shows that the firm did
not establish a proper plan and did not operate efficiently, which is why they expected to
make less profit in accounting year 2020.
 Prepared for future scenarios: Every firm has difficulties while carrying out its
operations. As a result, the corporation must plan in advance for potential challenges and
assist the firm in cooperating with changes.

PART B
Estimate after determining if Amana should accept to go online or establish its own online shop,
taking into account all of the company's expenditures.
According to the preceding case study, Mr. Amana's firm is operating and running extremely
well throughout the United Kingdom, Europe, and the United States. Mr. Amana, on the other
hand, tries to sell his items and run his firm online in order to increase sales. It's possible that
some of the Birmingham, Manchester, and Brighton branches will be closed (Naranjo Tuesta,
and et.al., 2021). However, there is a conflict between the two strategies for growing the
company: one is to move the entire organisation online, and the other is to sell the goods through
Amazon.
Accepting the prospects of the cities are closed and transferring online will automatically
decrease sales revenue and lead to only 50 percent of the turnover with the help of online website
because this organisation is borne to inclined some of the expenses that are fixed, improvement,
delivering expenses, and others but it provides a guarantee of selling 10,000 units annually. This
will result in a total cost like as:
Expenses for improving and maintaining the internet website = £ 50000.00
A full-time IT programmer earns GBP 35,000.00 per year.
Expenses for the delivery system are £ 150000.00.
Total costs: £ 235000.00 (50000.00 + 35000.00 + 150000.00).
The second element is to make a decision on whether or not to sell the items straight to
Amazon. It will guarantee the selling of 65000 units each year. It demonstrates that the costs of
converting the firm to an online platform are £ 1,85,000, with Amazon fulfilment fees of £
50,000.
Amazon is a large international online gateway platform that offers a variety of goods and
services to customers as well as assisting sellers in selling their products. It also offers customers
an online payment service from one person to another (Sari, and et.al., 2020).
Now, based on the aforementioned case study, it can be seen that there is a difference
between starting an online business and selling things on Amazon.
Point of Difference Selling on Amazon Establishing own business
site
Reach The company has the largest The time it takes to reach the

client base, which enhances
sales opportunities. Basically,
Amazon has established a
stronger reputation in the
industry, and as a result, a
greater number of customers
are ordering their products
through the Amazon website
(Zou, Zeng, Zhou, and Xiao,
2019). They have a
significant number of users in
each of the countries.
customer is rather long. In
plain terms, maintaining one's
own website takes a long time
to meet consumer demands
and an even longer period to
establish client confidence in
the website. Amazon and
other more online websites
take longer to build a positive
reputation in the industry. So,
if a company also creates its
own website, it will take a lot
longer to build goodwill.
Management cost It will take care of the
website's upkeep for the
vendors. Basically, if a seller
sells a product on an internet
website, such as Amazon, the
retailer will be charged for
the retailer's maintenance
costs.
Everything is under the
supervision of the company's
owner (Wu, and Wang,
2020). There is no charge
related to management
because everything is under
the owner's control.
Control The vendor has no influence
on the page or the pricing of
the items.
The company's owner has
total control over page
decoration, product removal,
and sign-in (Pasch, 2019).
Expenditure For a retailer to open an
Amazon seller account, they
simply needed £50,000.
The decision to sell after
establishing an online store
will be costly to the website's
owner. It will cost £1,85,000
in total.
Firm data It is a well-established firm Data recovery from a new

that already has a collection
of data that is used to assess
the buyer's nature.
company will take time. The
public will take longer to visit
the company's online website
due to the volume of traffic.
The following stages are expressed and discussed in the table above:
 The costs of expanding one's own website will be higher in comparison to a
corporation that is already established and has a public board of directors.
 If a firm sells its products on its own website, the data of the company is protected;
but, if a company sells its products on another website, such as Amazon, there is no
assurance of data security, and there is a significant danger of data insecurity.
 If a firm sells its products on Amazon, it has already begun to improve the facilities
and services it offers to customers. However, if a company sells its products on its
own website, it has the option of deciding how best to provide better service and
facilities to its customers; otherwise, the company's own website will lose its stability
in a competitive market, making it difficult for the business to remain stable in the
long run (Tashakor, Appuhami, and Munir, 2019).
As a result of the foregoing case study, it can be concluded that Mr. Amana should create his
own website, and that building a page will instantly produce profit for Mr. Amana. Producing in
greater quantities lowers the per-unit cost and boosts the company's profitability.
CONCLUSION
As can be seen from the above report, the reason for the company's lower revenue, gross
profit, and net profit is that it spends more on expenses and focuses less on revenue. As a result
of these factors, the firm's efficiency decreases, making it difficult to meet the company's goals
and objectives. The aforementioned research clearly states that in 2020, certain additional
variables, such as traceable costs, high spend expenses, and areas where it incurred high
expenses, would pose a difficulty for the company. These are the obstacles that will cause
problems for the company. Finally, several upgrades are recommended in order to reduce
excessive expenditures and sales. As a result, that company may make a lot of money.

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