Management Accounting: Analysis of Amana Ltd's Financial Performance and Recommendations for Improvement

This report provides an analysis of Amana Ltd's financial performance during the year 2020, including a monthly control report, performance report, and recommendations for improvement. It also discusses the decision to operate the business online and whether to sell on Amazon or set up their own shop.

Management
Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
PART A...........................................................................................................................................3
1. Montly Control Report of Amana Ltd....................................................................................3
2. Report on Amana's Performance during the Year 2020..........................................................4
3.Recommendations for improvement........................................................................................5
PART B............................................................................................................................................7
1.Analysis of Amana's Ltd decision to operate business online:................................................7
Analysis To setup their own shop or to sell on Amazon:...........................................................8
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management Accounting plays essential role in business. It also called as managerial
accounting, as it gives information in terms of finance and resources to the owner of business in
the process of decision making. Basically it is process of identifying, measuring, analysing and
interpretation financial information. Management accounting main aim is to help managers
within the organisation. It helps the management to effectively perform all its activities, which
involves planning, organizing, staffing, directing and controlling. It utilize information related to
goods and service cost. In operational planning budget are used to quantify the decision. It also
involves cash flow analysis,forecasting and trend analysis. Main aim of this report is to Analyse
Amana ltd, tourist business financial performance during the year 2020 (Loo and Vosselman
2018). This report includes monthly control report of Amana's business which represents the
original budget, flexed budget and variances. After analysing financial performance report,
recommendation to Amana's CEO on Various areas of improvement provided. In part B analysis
of business should go online or not discussed. Futher more it includes suggestion how can
Amana increase their sale by selling products on online platform.
PART A
1. Montly Control Report of Amana Ltd.
Budget is one of the most essential tool which guide business. Budget gives important
information for performing, operating, managing sudden unexpected threats and turning a profit.
An effective budget find out capital, anticipate revenues and estimate expenditure. It permits
business to supervise and support in effective understanding whether your business has efficient
revenue to pay off expenses. Budget can help business to take more informed financial decision.
It helps business in various ways such as to make budget both the short and long term goals. It is
a tool to analyse expenses, revenue and cash flows to maintain effective records of financial
information.
Budget variance shows examples where the actual cost can be lower or higher as compared to
the standard or projected costs. An negative budget variance is an indicator of shortfall in budget,
which may be happen due to high in revenue (Dewi Nasfi and Yuliza 2021). Variance may be
arises due to any reason whether internal or external.

Original Budget Actual Variances
Units 100000 80000 20000
Selling price 25 20 5/- per unit
Sales 25,00,000 16,00,000 900000
Variable Costs
Material 250000 280000 30000
Labour 400000 440000 40
Overheads 150000 120000 30000
Contribution 17,00,000 760000
Fixed Costs
Warehouse rentals 200000 170000
Insurance 100000 100000 -
Full time warehouse
supervisor salary
50000 35000 15000
Profit 13,50,000 455000 895000
2. Report on Amana's Performance during the Year 2020
In relation to original budget performance of Amana's Decreases during the year 2020 as there is
silently decrease in sales unit by 20,000 which was the major source of performance. Prices
which was fix by the customer reduces by 20 pe unit and became the reason of decline in sales
by 900,000. Both the material cost and variable cost raises then the expected original budget by
30,000 similarly labour cost is also raises then the original budget by 40,000. Both the variable
cost adversely effect Amana's ltd performance. But there is also decline in overheads by 30,000
which indicates better sign for the company than the original budget. By analysing cost of
variable and sale, there is significant reduction in sum of 940,000 in Amana's contribution. Fixed

cost involves warehouse rentals which decreases by its original budgets which help in effective
result by 30,000, cost of insurance is exact as original budget so, that there is zero affect on
performance of Amana (van Mourik and Wilkin 2019). Salary of Warehouse supervisor also cut
down by 15,000 that positively effects the performance of company. After considering each cost
and sale, there was remarkable reduction in profit by 895,000. After analysing Amana's data,
there are various ways which can help Amana to improve there performance in comparison with
the original budget. If company effectively track record or track everything which are to be
recorded. At the time, when Amana make original budget for a specific period of time. They
have to involve each department apply their each suggestions. Amana have to be serious about
their targets if they want to predict company's financial position in future. Amana also not focus
on their original budget that's why there is unfavourable variances between the actual cost and
budgeted costs, If they considered all expenses and identify different ways to decrease the cost
they are spending on both the fixed and variable cost they can enhance their financial
performance. Along with this company can also engage sum amount of money for their
expenditures to analyse how much is probably to cost and Amana should also reduce cost for
hiring staff which work on lower wages. This helps Amana's business to analyse budgetary
wages fulfil rather they spend unnecessarily (Davoodi 2020).
3.Recommendations for improvement
There are various ways which helps the Amana's Ltd to improve its financial
performance, Improvement in there budgeting helps them to reduce their unexpected or
unnecessary cost.
 Identify infrastructure that helps their budgeting process: Amana Ltd have to
understand or identify infrastructure that help in process such as posses, employees
financial, technology what makes business operations going effectively and efficiently
and ensure the various moves need for execution are adhered to all over the broad.
 Analyse Effective performance metrics for budget: Set effective and efficient Key
performance indicator help business-to effectively make budgeting, and related procedure
to analyse the financial health of business because it is relates with the earning growth,
revenue growth.
 Manage Variable cost: If Amana Ltd effectively analyse their past variable expenses
and compute at what present age of sale they represent. If business utilize historic

percentage it give business an effective indicator of potential future cost and a standard to
utilize in keeping those costs in line with selling activity (Boulianne Keddie and Postaire
2018).
 Make an plan for dynamic condition: Business have to plan according to the
availability of resources, cost If Amana want to be in a position to attain leadership
require proper planning towards budgeting.
 Utilize Efficient Budgeting software: If they Adopt different software solution to
enhance their budgeting efficiency, consistency and accuracy, this will save time and help
business to achieve their targets (Feldermann and Hiebl 2020).
Amana Ltd have to improve in sale units, as they require to raise there units of selling by
establish their business on online web-based services in which they point out the interest of
souvenirs, conduct business on social-media, expand B2B network, identify market market trend
etc. If Amana not want to attract tourist by decreasing prices than they need to attract existing
customer's, by providing them special offers, packages. Reduction in variable cost help business
to raise their profit. All the material should manage effectively in order to evaluate with original
budget. Along with this they have to decrease wastage, unnecessary product, requires to identify
more suppliers so, that negotiation can take place. Some techniques for labour price should be
reduce as they have to gi8ve efficient training to their workers, company should apply lean
production which reduces non-value ass processes with manufacturing requirements to
implement process such as standardization which result in economies of scale and help Amana
Ltd to increase their whole production. If labour price equal with the original budget that is a
good sign for companies. By comparing with original budget overheads incurred less, it is
essential for company to maintain same level of overheads in future so that it can not affect
revenue of the company. There is warehouse rental which incurred less as compared to the
original budget when fixed cost taken into hand, look positive for company but they require to
maintain their rental So, that they can not go beyond. There are various ways which help the
Amana Ltd to raise its revenue in order to prolonged lock down period between the period
December to February 2021. Amana have to find out and adopt new and advance technology to
achieve future opportunities, company has to move over video call meetings, phones to
effectively communicate with their clients. Amanda conduct their business in tourism industry in
more than 40 years but if the CEO of company focuses on critical as well as essential areas like

to sell their souvenir on online platform which may also bring competition for the business,
which help them to maintain their social-media websites and other e-commerce platform in
which they conduct their operations (Agndal and Nilsson 2019). Changing nature of the tourism
attack hard in pandemic situation then to come out from this they need to bring out some
strategies like deals for social media fans or may be digital coupons that only their social media
followers can avail, organise themed contests like on Easter day gives a lot of space for themed
games. Some businesses can ask their customer to prepare for Easter song and send them in the
videos. On the other hand, Amana Ltd would invest tactfully in promotional campaigns or offer
free shipping as well as free gift wrapping for all customer which deals in online mode. Amana
require to work on build or add to their email list and use or update its Customer Relationship
Management tool they need to segment their prospect list of the customer and customize the
messaging to turn them into leads like former clients, niche markets, lost opportunities and
previously met customers etc. Amana's business require to analyse all operations and function in
the company so that a group of ideas may lead to get a flexible budget, establish clear objectives
for every business department or units. The basic thing to do while preparing budget is to create
proper alignment of objectives across the company. There are are various other area which have
to be improve by the CEO like they require to analyse its budget and circulate them with
everyone this help than a group of thoughts may leads to clear objectives, flexible budget for all
department (Christ and Burritt 2018).
PART B
1.Analysis of Amana's Ltd decision to operate business online:
In UK, US, and Europe competition increases rapidly, it became essential for Amana to
offer products to the customer's on online mode without wasting ant time. If the Amana's not
conduct their business online then they require to offer their souvenirs through various centres
which will negatively effect sale of Amana. This happen because customer find easy to select
product online and have relative prices which state that they should go online instead offline. In
term of smooth implementation of business operations and shift their half business on online.
This is an effective sign of business to conduct on online platform as it will positively effect
overall sale profit of the business. If Amana conduct their business online it helps them to
enhance their image in the mind of tourist. It involves low start-up cost and time. Along with this
if Amana's company workers want to work after the working hours then they can work from

anywhere which help them to decrease operational cost and to increase their profit margin. They
can also target global market, as by making their own social media websites which gives
effective quality goods at attractive discounts and offers (Riley and Yen 2019).
Analysis To setup their own shop or to sell on Amazon:
It refers that Amana's ltd whether to sell its product on amazon or set up its own shop.
With the help of give data analysis take place. If Amana setup their own website they will
incurred the cost by the guaranteed sale of 100,000 u8nit annually:
Cost of setting up delivery networks £ 150,000
cost of upgrading current websites to handle large volume of sales £ 50,000
full time IT programmer salary £ 35,000
Total £ 235,000
During the year total cost incurred with the sale of 100,000 units provide per unit cost of £2.35
By guaranteed sale of 100,000 units annually Amana Ltd has different alternative of providing
products on amazon. It seems that there is lack of control over the price, which states that there is
private goods which labelled by amazon conduct its places order with vendor for goods, set
prices for the goods. Which simply indicates that there is high chances of losses to Amana
business. Other reason for vendor to incur loss, these return policy which provide souvenirs will
return by customers. Amana not fix by selling its goods through Amazon online because of lack
on pricing control and there current return policy only have 65,000 units. If Amana sell their
product through their own social media website by investing an amount of £ 235,000 with the
guaranteed sale of 100,000 units which indicates that they incur £ 2.35 per unit sold. If Amana
control over pricing they can sustain in market for longer period of time by which they can sell
souvenirs at ant cost with the help of various discount and offers. Amana can operate their
business from anywhere with the guaranteed sale which help the business to sell more products.
From the above analysis, it stataes that if Amana conduct their business on online platform
through their own website rather than sell on Amazon because there are lots of competition on
amazon on each and every product sector, Amana has less chance to show its brand presence
because there is lack of control. There are several benefits if Amana sell their product on their
own website as they have full control over all the operations and functions like from content to
design. If they have their own websites customer find easy to purchase online at anytime and
anywhere. Amana can achieve more revenue from their own website. By having their own

website, customer anytime from anywhere. Amana have full control on customer targeting by
personalizing email lists or pointout social media marketing campaigns (Jovanović and Janjić
2018). If they have their own website, customers are always able to find anytime or anywhere
and even outside of business hours, they are able to to find and secure new customers. As clear
from above data, there is guaranteed sales of 100,000 units or they can achieve more which
results in more profits. It is because Amana can find a way to reduce its operating cost like staff
wages, rentals and some utilities. Eliminating these overheads will allow Amana's to lower its
prices, so their business gives some real competitive edge. It is advised to the Amana company
they should go for making or upgrading its own website because if they operate their business
function on online mode they earn more profit as compared to sell on Amazon (Johar Hassan
and Musa 2019).

CONCLUSION
It is concluded from the above report that in part A the analysis of variances from actual budget
to original budget made. Also Amana's performance during the year 2020 on budget made.
Along with this report includes recommendation to Amana's CEO on the various areas of
improvement. Additionally in Part B report involves a deep analysis of decision in term of
Amana's to sell their product on their own website or to sell on amazon. It recommended that
Amana should begin to sell their products online on their own website to stand in competitive
edge. If they sell product on their own website they have full control over all the operation and
activities (Aranda Arellano and Davila 2019).

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