Management Accounting: Monthly Control Report and Analysis of Amana's Performance in 2020

This report provides a monthly control report and analysis of Amana's performance in 2020. It includes recommendations for areas of improvement and an analysis of Mr. Amana's decision to go online and set up an online business.

Management Accounting

Contents
INTRODUCTION.......................................................................................................................................3
TASK..........................................................................................................................................................3
Monthly control report.............................................................................................................................3
Amana’s performance during the year 2020............................................................................................5
Recommendations to areas for improvement...........................................................................................6
PART B.......................................................................................................................................................7
Provide an analysis of Mr. Amana’s decision to go online and advise to set up online business.............7
CONCLUSION.........................................................................................................................................10
REFERENCES..........................................................................................................................................11

INTRODUCTION
“The process of identifying, measuring, accumulating, analyzing, preparing, interpreting
and communicating information used among administration to organize, try to assess, and
regulation in just an organisation, as well as to facilitate effective use of something responsibility
for its reserves,” according to Management Accounting. The production of accounting results for
non-management parties such like stakeholders, bondholders, federal bodies, and taxpayers” is
included in management accounting (Amadi and Ejiogu, 2021). Management is tasked with the
primary responsibility of creating, executing, and controlling an organization's operational
activities. It is continuously in need of accounting data with which to make decisions. This study
was based on Amana Ltd, an English company that sells gifts to visitors. When the Covid-19
epidemic broke out in England recently, the government was forced to impose restrictions on
movement and transportation, which had a severe impact on the tourism industry. The actual and
original budget calculations, as well as the company's current performance, are included in this
report. Additionally, provide relevant recommendations for suitable development.
TASK
Monthly control report
A monthly statement is a summary that project leaders must provide one week since the
end of the month can provide status update on initiatives. Unless they provide extra papers, such
as graphical form to show the progress of the company's efforts, a monthly report is usually one
or two pages long. Payroll expenditures, electricity and other building overhead costs, monthly
income, and any variations in spending from month to month are all included in quarterly
budgeting statements. As per the money managers at the Principles of Accounting website,
budget reports are critical papers for an increase in government expenditure. A company owner
requires continual access to financial reporting data in order to acquire the knowledge and skills
or respond to present difficulties (Elgibaly, 2020) (Lyudmyla, 2021). To get the most out of a
monthly, quarterly, or annual budget report, the business owner must first grasp the relevance of
each report individually.

Particulars Cost per unit Original Flexed Actual Variances
Units 1,00,000 20000 80,000
Selling price 25 2,000,000
Revenues 2,000,000
Variable
costs:
Materials 2.50 2,50,000 3000 2,80,000 (30000)
Labor 4 4,00,000 40000 4,40,000 (40000)
Overhead 1.50 1,50,000 30000 1,20,000 30000
Contribution 17 17,00,000 5400000 11,60,000 540000
Fixed
Warehouse
rental
200000 2,00,000 30000 1,70,000 30,000
Insurance 100000 100,000 Nil 100,000
Fulltime
warehouse
supervisory
salary
50,000 50,000 15000 35,000 15,000
Profit -70000
Budgeted Actual Variances Favorable/
Unfavorable
Units 1,00,000 80,000
Materials 2,50,000 2,80,000 (30000) Unfavorable
Labor 4,00,000 4,40,000 (40000) Unfavorable
Overhead 1,50,000 1,20,000 30000 Favorable
Contribution 17,00,000 11,60,000 540000 Favorable
Fixed

Warehouse rental 2,00,000 1,70,000 30,000 Favorable
Insurance 100,000 100,000
Fulltime
warehouse
supervisory salary
50,000 35,000 15,000 Favorable
As per the performance report get variances that category into favorable and unfavorable
manner.
Amana’s performance during the year 2020
As per the performance report, there are identifiable discrepancies between the original
and actual budgets that are identified by variances. There are significant discrepancies in amount
predictions, which have a broad effect on the product process. The finance department set a
budget for ongoing missions such as manufacturing units of 100,000, but only 80,000 were
produced in the end. The corporation's direct material is worth $250000, labour is worth
$400000, and overhead is about $150000. However, because these are rising in number, they do
not match the planned amount and there are discrepancies. Certain circumstances are beneficial,
while others are undesirable.
While guests were unable to fly for the Easter holiday in April 2020, Amana's revenue
was severely impacted. Revenues increased somewhat in the summer of 2020, but the prolonged
lockout from December 2020 to February 2021 drained any additional income earned during the
season. Originally, Amana ltd solely functioned in retail stores, with a developed highly serve as
a promotional medium. The company's owner, Mr. Amana, has established a management group
and proposed a pay cut. It aids in achieving long-term sustainability and successful results
(RASHID, 2020).
• Boost staff morale by utilizing company produce evaluations to recognize and reward their
accomplishments, as well as educating them professional skills and how to promote products so
that customers complete several purchases at once.
• Research customers to find out what they want to see in introducing new products.

• Find new consumers: Prospective customers might help to expand business.
• Develop new technologies: Conduct market research to discover how they might expand
business into other areas.
• Customer Service: Create a personnel training project to enhance customer service.
Recommendations to areas for improvement
Amana is receiving recommendations for several areas of development based on performance in
2020, such as:
Fixed cost: The fixed cost is a cost that does not fluctuate in the near term, regardless of how the
quantity of different profit changes. This cost is generally a continuous expense for a business's
fundamental operation, or in other terms, a company's fundamental operating cost that is
necessary and cannot be avoided. The value of fixed cost influences the product's cost and, as a
result, the company's profit and loss. As soon as the rental agreement is in effect, this fee will not
vary. Therefore, the rent is a set expense. Other illustration would be the property tax. Fixed
expenses are frequently referred to as absorption costing since they are generally payable at
heavy intervals (for illustration, monthly rent).
Variable cost: Once the production (amount of products or services provided by the component)
fluctuates, these are the expenses that change as the overall cost to the organisation. To put it
another way, we may argue that a variable cost fluctuates in the very same percentage as the
production. If a result, as sales rise, variable expenses will rise as well. The price of flour, for
instance, is a variable cost in a bakery (Boyle, Boyle and Hermanson, 2020). Likewise, the
manufactured goods and product of the firm will influence the variable cost in other enterprises.
Variable costs are those that alter in direct proportion to changes in manufacturing quantity.
Profit: The larger the gross margin, the more money a firm keeps from each dollar of sales,
which it may utilise to cover other expenses or pay off debt. Cancellations, concessions, and
reductions are subtracted from gross income to arrive at the net sales number.
Sales: Expand the market while raising or decreasing the cost of products sold per unit. The
manufacturing overhead cost per unit decreases as capacity utilization increases, boosting total

sales can lower the cost of products sold. A greater gross profit margin is achieved by increasing
revenue while lowering the cost of products sold per unit.
There are providing suggestions in regard of budget planning and management to CEO Amana
such as:
 Keep budgeting and forecasting flexible: Predictions and budgets that are too restrictive
aren't very helpful. Things can change throughout the year, and they must be able to
account for those changes and their impact on company. Continually making judgments
based on the highest predictions made months ago might result in costly mistakes.
Furthermore, requiring staff to meet goals based on outdated data is ineffective and
infuriating. Greater precision and better outcomes in business may be achieved by
incorporating adaptability into planning and budgeting (Rezaie and et.al, 2020).
 Implement rolling forecasts and budgets: They can revise rolling predictions and budgets
given current data rather than what a management predicted a few months ago.
Estimation is important for the next quarter rather than the whole year using this method.
The estimates are wider each month because they'll be modified as well. Rolling forecasts
help to better match the budgets with the stated strategy while also increasing predictive
performance.
 Involve entire team: Planning and projecting should be efficient administration so that
sectors and entities have a strong sense other than their own responsibilities. Personnel
with a handle on the respective units, in conjunction to many in the accounts department,
will provide the data for making actionable insights and create accurate forecasts.
However, along with the entire squad permits for multiple views on where the
corporation is today and where it could use it in the potential.
PART B
Provide an analysis of Mr. Amana’s decision to go online and advise to set up online business
Mr. Amana also discovered that many of his competitors now sell their items to customers in the
United Kingdom, Europe, and the United States over the internet. In addition to tracking

manufacturing and transfer 50% of income online, Amana has considering closing facilities in
Brighton, Birmingham city centre, and Manchester city centre. Mr. Amana is advised to start an
online business and promote their goods on Amazon.
 Quick access to the marketplace - In many respects, businesses' entrance to the market
has never been simpler. Anyone can set up a basic online shop and sell items in minutes
using online stores like eBay and Amazon (Lubis, Azmi and Suriyanti, 2020).
 Reduced overheads - marketing online can eliminate any need for costly physical
locations and consumer employees, enabling to put more money into advertising and
improving the shopping experience on your e-commerce site.
 Potential to rapid growth: Conventional restrictions to retail expansion, such as locating
and purchasing for larger items, are not important considerations when selling over the
internet. They may react and increase rising sales with a solid digital marketing strategy
and a plan to build up contract management services.
 Extend market / export - One significant advantage of online merchants over brick-and-
mortar stores is the ability to swiftly increase market further than regular customers. They
may uncover a significant demand for items in other nations, which they may meet by
focused marketing, translating website into other languages, or collaborating with an
international firm.
 Be clear about goals: Forecasting is used to foresee a corporation's economic prospects.
Predicting assists in the creating of management decisions as well as the comprehension
of their consequences before they are implemented. When they don't understand the
aligned with the business aims, their ability to successfully estimate the firm's earnings
destiny suffers. As a result, they should have a clear grasp of what drives forecasting
forecasts; alternatively, they're just assumptions that aren't based on the corporate goals
(Arif and et.al, 2020).
 Offers incredible scalability: Not all internet business will immediately transform into a
massive success with quick rapid evolution. Several entrepreneurs start an internet
company believing that even though they have a limited online footprint, clients will
discover them and sales would come in naturally. They believe it will only need a few
tweets and Face book posts to turn an internet firm into a virtual ATM machine.
Expanding any company, if it is a brick-and-mortar store or an internet firm, is difficult,

but there are benefits of having an internet presence. A brick-and-mortar retail outlet, for
example, has a specified audience, usually within a certain radius of the company site.
This does not apply to an internet firm, which may promote to a global audience.
 Provides limitless freedom: Due to the obvious flexibility internet firms provide, many
businessmen are drawn to them. Modern tech, computers, smart phones, enterprise
applications, and VOIP communication devices are just a few of the technologies that
make it possible to run a business from anywhere. Take a peek around every time they're
at a Starbucks. When activated and enjoying their favorite coffee, I'm sure someone is
functioning on their online company or business (Nabavian and et.al, 2020).
 Low overhead and high margins: Many of the significant expenditures involved with an
independent store may be avoided with an internet firm. Need to not only they get rid of
things like expensive office or commercial shops and rental agreement obligations, but
you can also get rid of needing to spend cash on stock. A manufacturer's fall contract or a
manufacturing and distribution contract can substantially minimize economic risks and
ensure to keep more stable profits with less initial investment.
 Access to worldwide market: The beauty of having an internet company is that you may
operate it at any time of day or night. There are still no geographical restrictions and no
set operation hours for an internet business; it may generate money at any time, even
while you sleep. An internet business may prosper with a well-thought-out social media
plan, online marketing, and maximum rated techniques. They have complete control over
the entire planet at their fingertips. The ability to target certain areas, areas, and nations
offers online-based enterprises an advantage.
Sale out products on Amazon
The subject of whether or not to sell on Amazon is a hot topic for everyone from tiny enterprises
to global behemoths. People go over to Amazon first after performing an online product inquiry,
before of even Google. Amazon currently accounts for 38.5 percent of all eCommerce sales in
the United States, and it has more than 200 million regular consumers. Those are amazing
numbers for any company, regardless of its size.

 Competition: Whenever it relates to Amazon, it's a given that the rivalry will be fierce.
Because Amazon is one of the largest competitors in its sector, the company may have to
contend with dozens of other vendors (O'Connell and et.al, 2020).
 Control issues: By joining a marketplace, they agree to follow its rules. Amazon is more
concerned with the items than with the vendors. This implies they have extremely limited
options for promoting company.
 Fees: While being on Amazon is certain to improve income, this does come with a price.
If they've a business accounts or use FBA (Fulfillment by Amazon), they will still be
charged fees. It's well worth money to investigate Amazon price structure when
registering for marketplaces accounts.
 Earn repeat business without marketing: Standalone ecommerce companies (such as Ebay
and Woo commerce) must spend millions of dollars on marketing merely to let customers
believe they exist, but Amazon has an existing client base that no independent site can
match. And, according to Fairleigh, Amazon vendors earn return consumers if they
provide outstanding customer service.
Therefore, there are advantages and disadvantages to utilizing Amazon as a forum, and
before decide, consider the advantages and disadvantages of using own webpage as major selling
channel. Just 20% of participants regarded Amazon as a significant competitor in the study, but
40% saw upcoming deliveries as their largest long-term problem, suggesting that they may
modify their minds regarding Amazon in the future. Most ecommerce businesses cannot meet
Amazon's shipping timeframes without a professional fulfillment associate, and Amazon Prime
is a good answer to this dilemma (Toporkova and Lytovchenko, 2021).
CONCLUSION
Management accounting is made from of the words "management" and "accounting."
The term "management" refers not only to senior management, but to all employees tasked with
the power and duty of running a business. The goal of management accounting is to provide
bookkeeping guidance to stakeholders that might then use it to make decisions.

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