Management Accounting: Budgetary Control Report and Online Selling Decision for Amana Ltd

This report discusses the preparation of a budgetary control report for Amana Ltd. for the year 2020, analyzing the company's performance and providing recommendations for improvement. It also analyzes the decision of Mr. Amana to go online and advises whether he should set up his own online shop or sell on Amazon, considering all the important costs.

Management
Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
A) Prepare a monthly control report with flexed budget, original budget and variances for
Amana Ltd...................................................................................................................................3
B) Using the above prepared control report, analyse the performance of Amana Ltd. for the
year 2020.....................................................................................................................................4
C) Recommend the CEO of Amana with the ways they can improve........................................6
TASK 2 ...........................................................................................................................................6
Give and analysis Mr. Amana's decision to go online and advise whether he should set up his
own online shop or sell on Amazon by considering all the important costs...............................6
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
A budget refers to an approximation of incomes and expenses which would be taking place over
a certain future period of time. These estimated figures are revalued at regular intervals to be
accurate over a period of time. These budgets can be used by an individual, group of individuals
a corporate, the government authorities (Kasasbeh, 2018). They uses these budgets to
strategically plan better. This report highlights how the budgetary control report are prepared
showing the actual and standard budget of the case of Amana Ltd. For a 2020. The report also
shows a detailed analysis about the performance of the company during Covid-19 pandemic with
needed recommendations for the same. The next part of the report gives an analysis of the
scenarios present with Amana if he wants to sell online, should he go with Amazon or set up his
own online shop.
TASK 1
A) Prepare a monthly control report with flexed budget, original budget and variances for Amana
Ltd.
Monthly Control Report of budgeting consists of crucial information which is related to
different kinds of direct and indirect cost like wages, salaries, overhead costs and other expenses.
This report helps the strategic managers of a business to check their spending activities in the
view of minimizing all the costs related to it (Herschung, Mahlendorf, and Weber, 2018). It gives
insights to the business about how much they will earn in a period and how much costs will they
incur for same. These report also shows how much deviations are there in the actual and
projected figures as only then the business can take required decision to bring down these
variances.
Flexed Budget refers to that kind of budget which changes according to the actual revenue or
income earned by the business. It also focuses on the specific costs incurred by the business
which have changed from the projected i=
Original Budget refers to that kind of budget which is prepared on the basis of past data, costs
incurred in the past and level of production reached. By this budget the firms find it easier to
contemplate how the business would perform next year and coming years. And also about the
profits of the business in the coming period.

Budget Variance refers to the differences that have arised in the actual and projected budget.
These refers to the measure which is used by the institutions to compare the standard and actual
figures. If the variance is favourable, it shows the gains of the business but if the variance is
unfavorable, it shows the negative difference that have occurred in standard and actual (Libby,
and Salterio, 2019). The concept of budget variance is that it shows that the budgets can not
foresee the future and income with accuracy.
Following is the Budgeted control report of Amana ltd:
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 Labour 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%

B) Using the above prepared control report, analyse the performance of Amana Ltd. for the year
2020.
Following are the steps which can be used by the interpreter to analyse the control report of
Amana Ltd.
1. Track the Expenses: The most crucial use of financial budgetary is that these helps the
management keep a check of the different expenses that may arise in the life of
businesses(Sharovatova, and et.al., 2018). The financial statements are prepared on
yearly basis but the production spending plan is made on a monthly basis. The variance
analysis of the budget assists the managers determine whether there is any scope to save
the costs. Vast spending plan of the business may require to integrate their spending plan
with the monetary requirements of the business for same.
2. Identify the area of over-expenditure: Due to preparation and analysis of the budget
reports, the area which have dealt with high cost or over-expenditure can be looked upon
and necessary decisions can be taken (Balios, 2021).
3. The areas where the extra money is spent: In this step the management compares the
areas where less amount is spent with those with extra. While preparation of new budget
these amounts can be taken into account.
Following is the actual analysis that is being done for the budget report prepared for Amana Ltd.
 The Flexed budget is showing less sales than the original budget. This means that the
company has to promote its quantity while increasing the selling price as well. This wil;l
help the business in earning more profit for the year. According to the original budget,
the selling price is GBP 25 and the units sold are 100000. These both the amounts are
greater than the projected budget. Due to this huge difference the performance of the
company has severely affected.
 The raw material and labour variance is really high. In the original budget, the cost is
10% per unit of selling price per unit. But the actual cost is GBP 280000 which is greater
than 10% . hence the company needs to decrease the cost of raw materials which in turn
help the expense.
 The labour cost per unit can also be decreased on the basis of quantity of units produced
in a momth. This is because the cost of direct labour is reducing in the flexed budget.

 The gross profit of the organization is really more little in comparison from the primary
plan, which is by 55.29 %. The outcome of the income and the operational disbursement
is shown in the figure of gross income. So, from the beginning itself, the income and the
shifting costs should be managed decently (Tilt, 2018).
 The rigid overheads consider storage lease, security, and full-time storehouse supervisor
remuneration. The preceding all the rigid cost are little from the primary fund in scrutiny
from the existent plan.
 The net income is little by 66.30 % from the primary plan. It should be seized into a
sincere thought of reduction in some the shifting and the rigid expenditure. Because
through this the eventual fiscal wellness of the organisation is reckoning and if the net
profits will be in the destructive than it will impact the action as well as the growth of the
Amana Ltd.
C) Recommend the CEO of Amana with the ways they can improve.
Following are the recommendations that can be given based on the performance report
above:
 The first focus is on increasing the revenue of the business. For this the business should
work on increasing the amount of manufacturing units which would in return increase the
profits of the business. After considering the costs the business should also try to increase
the price of its product but the business should keep in mind that this is one the crucial
steps which should be taken with full care (Sellami, and Gafsi, 2019).
 The business management should be more focused on how the direct material budgeted
costs are more than the actual. This means that the that the funds here are idle and the
wastage of materials is happening. The management is required to take certain studies by
which they would know what strict actions they are required to take to reduce this
wastage of funds.
 The costs of labour should be fixed by the management as these can be reduced on the
basis of units produced and the amount of work done by the labour per hour. By this the
allocation of those funds can be done.

TASK 2
Give and analysis Mr. Amana's decision to go online and advise whether he should set up his
own online shop or sell on Amazon by considering all the important costs.
The rival of Mr. Amana's enterprise is increasing online in the nation like UK, Europe
and US. It has definite to transform its commercial enterprise online and the two premises of
going online are:
 By concluding the division of Brighton, Birmingham and Manchester by tossing the 50%
gross sales online. For this definite fixed costs will be reasoned such as: reimbursement
of setting the transportation web, earnings of IT coder and value of accliviting the
internet site. But, it besides this assurance 100000 units of income yearly. Mr Amana has
to fund a total cost of -
Expenditure of setting up transportation web = £150,00
Expenditure of raising actual internet site to hold large mass of sales = £50,000
Wage of a full-time IT coder = £35,000 per annum
Total Expenditure = 150000 + 50000 + 35000 = £ 235,000
 It besides this, has the choice of selling its merchandise instantly on Amazon and just pay
its satisfaction fees (Hejazi, and Meyhami, 2017). It gives a secure sale of 65000 units
yearly and by accelerative the demand of its commodity. In this the entire cost will occur
-
Amazon fulfilment fees = £ 50,000
Thus, in setting up the personal online platform it will have to face more expenditure, which is a
immense difference of £ 185,000.
Amazon is a healthy – recognized platform. It has a large client – base. It is much
favourable to trade on amazon than to get the income on the personal web site. Because, to start
up an internet site of the own will yield vast costs and period of time too.
The further difference will clear the two choice more in detail.
Basis Amazon Setting up the online store
Reach It has a immense client base. It
enacts alone close to 40 % of the
yearly merchandising.
It will issue very overmuch period
to ambit to the consumers if the
minimal income of units is assured..

Management It will pull off the fixing and the
moving of the internet site. The
sellers on it demand not to manage
it, they just have to fund the
reimbursement.
It will be the division of the
proprietor as well to yield aid of the
care of the internet site and to
modify the commodity well-timed.
Oddly all the necessary expenditure
happen in operational the situation
will be cashed be the proprietor
itself (Al Mallak, and et.al., 2020).
Owned The power of the expenditure of the
merchandise and scheming of its
folio, is not the interest of the
vendor.
The businessperson has the entire
power over the page designing,
communicative in, obviate the
merchandise. It can manage it
reported to its own prize.
Costs To sell straight on Amazon will
need sole £ 50,000, this much of
expenditure compared to beginning
of the website.
The conclusion to sell the
production on own internet site will
necessitate a immense finance. The
reimbursement will take £ 235,000,
which is immense.
Data It has much info of the consumers
who retail store online.
It has to begin from the start, and to
collect the information of the online
customers could be hard.
Protection Selecting it, will give a kind
covering to the institution. The
customers cognise about it, has
have a kind fidelity and trust
towards the customers.
It has to create its own trade name
and make a allegiant user – base.

Control In this, it will not have the control
on the pricing policy of the items
and return policy (Vašiček, and
Roje, eds., 2019).
In this, the uppermost management
can set up the valuation and return
policy of the commodity reported to
its demand and supply.
From the above fluctuation, it can be concluded that -
 By making an own internet site, it will yield more expenditure than by instantly
commercialism on Amazon. So, reported to it investing in amazon will be healthful for
the organization in terms of expenditure.
 The income from sale of the commodity secured is much in the own internet site by
35000 units than the amazon. Nevertheless, it means that Mr. Amana's internet site will
render more than receipts from Amazon.
 By amazon Mr. Amana cannot command the value of the commodity but it can be
contained when he create his own online shop.
 The interest of managing the web site, will be bear by the amazon, if he chose to sale on
amazon instantly
Thus, from the preceding investigation it can be suggested to Mr. Amana to decide to open his
own online shop, because in the end the net income of the organization will be visible. By
creating more sales through it web site it can gain more net income.
CONCLUSION
The above-mentioned report can be concluded that the business and individuals should
not be fully dependent upon the budgeted values of different elements of cash and revenues.
These figures are not a index to be fully relied upon. Budget only gives the management an
overview or a brief insight as to what are the costs that might be faced by business. These figures
can be taken to get an overall evaluation of the business. The report talks about a case study of
Amana Ltd. The performance report of Amana has been prepared by evaluating the monthly
control report. The main aim to check in these reports is the variances that have occurred in
relation to the standard and actual figures. These variances shows all of those places where the
business management has to focus. It has shown that in the case the units or production has to be
increased and the prices should be increased to meet the costs that are happening in the business.

The projected costs should be made in accordance with the actual costs that are supposed to
happen as the report shows huge variances between the two. After this, the recommendation is
being provided which recommends the management that the profits are integral part of the good
financial health of the business. The advice is being provided to Mr. Amana on the issue that if
he should expand the business online by opening a shop of by selling the goods on Amazon. The
result of the study was that he should create his own business website due to the guarantee of
sales by that. Due to this the profits of the business would be more than the ones being earned
through amazon.

REFERENCES
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