Management Accounting: Performance Analysis and Improvement Strategies for Amana Ltd

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
(i) Presenting preparation of monthly control report showing original budget, flexed budget
and variance of Amana Ltd..........................................................................................................3
(ii) Presentation report on the performance of Amana Ltd, as per the control report of the year
2020.............................................................................................................................................5
(iii) Recommendation to Amana Ltd CEO regarding different areas of improvement...............6
PART B...........................................................................................................................................7
Comparative analysis of two options for Amana Ltd..................................................................7
Recommendation to Mr Amana...................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Management accounting is a vast concept. It basically means the evaluation and also the
communication of the financial information or the financial records to the managers of the
businesses to take the informative decisions efficiently. The concept of management accounting
is different from the concept of financial accounting in particular. The major focus of
management accounting is on the cost as well as the sales information of the particular
organization's commodities in particular. The report below provides information regarding the
company Amana Ltd. A business in England that is owned by a family. The business is mainly
of selling the souvenirs to the travellers in particular. The report highlights the issues the
business has particularly been facing due to the occurrence of the pandemic and this has
impacted the business in various ways which is mainly stated in this report in particular.
PART A
(i) Presenting preparation of monthly control report showing original budget, flexed budget and
variance of Amana Ltd.
Formula to compute flexed budget = Actual units * budgeted price/ cost
Formula to compute variance = Actual – flexed budget
The variance or gap between the actual and flexed budget can be either favourable or adverse.
In case if actual revenue is higher than the flexed revenue, than this indicate favourable variance.
While on the other hand, if actual cost is higher than the flexed cost, than this indicate adverse
variance (DO and et.al., 2020).
Particulars Original
Budget (£)
Flexed
Budget (£)
Actual (£) Variance (£)
(Actual budget
– Flexed
budget)
Favourable
or Adverse
Total number
of units sold
during the year
(A)
100000 80000 80000

Selling price
per unit (B)
25 25 20
Sales Revenue
(C) = A * B
1000000 * 25
= 2500000
80000 * 25 =
2000000
80000 * 20 =
1600000
1600000 –
2000000 =
-400000
Adverse
Less Variable
Costs:
Materials
(D)
100000 * 2.50
= 250000
80000 * 2.50
= 200000
80000 * 3.5 =
280000
280000 –
200000 =
80000
Adverse
Labour
(E)
100000 * 4 =
400000
80000 * 4 =
320000
80000 * 5.5 =
440000
440000 -
320000 =
120000
Adverse
Overheads
(F)
100000 * 1.50
= 150000
80000 * 1.50
= 120000
80000 * 1.5 =
120000
120000 –
120000 = 0
-
Contribution
(G) = C – D –
E - F
100000 * 17 =
1700000
80000 * 17 =
1360000
80000 * 9.5 =
760000
760000 –
1360000 =
-600000
Adverse
Less Fixed
overheads (H)
Warehouse
rental (I)
200000 200000 170000 170000 –
200000 =
-30000
Favourable
Insurance 100000 100000 100000 100000 –
100000 = 0
-
Fulltime
warehouse
supervisor
salary
50000 50000 35000 35000 – 50000
= -15000
Favourable
Profit 1350000 1010000 455000 455000 –
1010000 =
Adverse