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

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