Management Accounting: Budgeting and Digital Business Strategy

This report discusses the importance of budgeting and control reports in management accounting and provides suggestions for digital business strategy. It includes a detailed analysis of the budgeted controlled report of Amana Ltd and recommendations for alterations in the strategy. Additionally, it compares the advantages and disadvantages of establishing an own digital business or merchandising on Amazon. Course code and college/university not mentioned.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................4
PART A...........................................................................................................................................4
A. Set up the control report that denotes the actual, flexible budget and the budget deviation
on each month basis. ..................................................................................................................4
B. Computation the actions of the Amana Ltd by employing the control report in the year
2020 that is presented above.......................................................................................................6
C. Suggestions to the management of the Amana for alterations in the strategy........................8
TASK 2 ...........................................................................................................................................9
Analyse the decision of Mr. Amana to take the businesses in digital mode and give
suggestions to establish the own digital business or to merchandise on Amazon by decide the
various expense...........................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Budget is the statement of projected income and the expenses to be spend in the future
time period. The preparation of the budget report helps the organisation to know the allocation of
the cost and the money to be spend on the various departments. It is utilize to understand the
monetary performance or the position of the enterprise. It is the essential element of the planning
function. The company prepare the fixed and the flexible budget to estimate the production level
of the business. The first part of the report mention to build the controlled report to analyse the
performance of the organisation and to track the expenses of the company. These controlled
reports is prepared on the monthly basis to find out the deviations. Company has taken several
decisions to measure the outcome by measuring the budgeted report of the business. In the last
part organisation wants to diversify the business online and Amana Ltd has two choice whether
to collaborate with the Amazon site or to sell the goods through its own website (Hoque, 2018) .
PART A
A. Set up the control report that denotes the actual, flexible budget and the budget deviation on
each month basis.
Control report: It is the written document which provides the data about the several kinds of
expenses which is directly related to the production or manufacturing expenses. The control
report assist the manager to keep record of all the monetary expenditure with the aim to reduce
the over all cost related to the goods and service. It provide an idea to business of spending
estimated cost and the revenue will be earned in the future. It aids to compare the actual or
budgeted figures of the cost. This document helps us to take relevant decisions which is essential
for the operation of the business (Ikram, and Meslouhi, 2019).
Flexible budget: It is that type of budget that vary due to the modifications in the income or
profit of the business. It alters in short run or long run production function. In the long run of
production on the large scale all the factors become variable.
Original budget: It shows the current information of the budget which helps to predict the
future. The past information or historical data of cost or revenue is considered to for forecasting
the budget. This data of the budget furnishes to think that how organisation will function for the

next upcoming years. It will show the capacity of the organisation to boost the sales and increase
the revenue of the organisation.
Budget variance: Variance is the difference between the actual or standard output. After
executing the budget the next phase is to monitor or supervise the tasks of budget. The analysis
of the budget guides the organisation to know positive or negative consequence of the results. It
heps the business to know those areas where company show the poor performance (Khoruzhii,
Pavlychev, and Khoruzhii, 2018). The effective budget will be where the actual output is more
than the standard output and shows the ineffectiveness of the company when actual result is less
than the standard output. The differences of the output can have critical impact on the financial
health of the businesses. The function of budget variance is to work with the accuracy and to
foresee the company future in longer period of time.
The budgeted controlled report of Amaan Ltd is mentioned below:

B. Computation the actions of the Amana Ltd by employing the control report in the year 2020
that is presented above
There are various conclusions that is ascertained by the manager from the Amana Ltd control
report.
1. Monitor the expenditure: The budget manager should record the details of all the
expense s either manually or in the computer to be occurred in the organisation.
Company will prepare several types of the budget like production budget, sales budget,
and cash budget. The master budget is the summary of all the functional budget and
attains the all type of fiscal transactions of budget. It gives the overview that where
company is spending the excess money on the redundant items (Lawson, 2018).
2. Develop the portion of the spare expenditure: It refers to determine those areas where
organisation has overspend the money. The budget aids in the distribution and allocation
of the resources and the funds on various departments. It instruct the divisional manager
of the department not to spend the higher amount from the budgeted. Thus it helps to
control the cost and the expenses.
3. Identify the section of the extra fund: The project managers has to identify those
divisions or sections where company has pay the huge amount of money on the budget
implementation strategy. It supports the management to look out the direct and indirect
expenses of the over cost. It is estimated that company should raise the production level o
f the units to bring down the cost of the product. It helps to attain the cost efficiency
advantage to the organisation. This helps in the effective utilisation of the money and the
resources.
There are many results has been estimated from the above analysis:
 There is more sales of the product in the original budget as compared to the variable
budget. The company can maximise the sales of the production by manufacturing the
units on the broader level to cut down the cost per unit of the good. It will helps the
customer to get the products at the reasonable price. This will increase the revenue of the
organisation. The selling price is £ 25 and in the real budget 10000 units are sold. The
figure is higher as against with the projected cost. It has effect on the business operations.

 The variations in the raw material and the staff is more. The price is 10% of the sales per
unit in the original budget. The real expense is £ 280000 that is higher than 10%.
Therefore it is requisite for the organisation to reduce the price of the materials that helps
to improve the cost of the product (Menicucci, 2020).
 The expense of the workforce staff can be reduced by estimating the number of products
manufactured during the month. It happens because of the lower cost of workers in the
variable budget.
 The gross profit of the company has decreased in the recent year by the 55.29%. The
gross revenue is computed by deducting all the direct trade expenses of the organisation.
The company has to minimize the expenses for increasing the revenue of the
organisation. Thus it helps to create the balance between the expense and the income.
 The static expenses like salaries of the employees, rent of the factory, insurance cost, and
the maintenance charges. The figure of this expenses is constant and has to charged the
overall cost of the product.
 The net profit of the company is 66.30 % and it is lower than the real budget. It has
decreased due to the increasing level of the indirect cost and it has impact on the stability
and the performance of the businesses (Yee, 2020).
C. Suggestions to the management of the Amana for alterations in the strategy
There are various advice which should be needed to the Amana to increase the performance of
the company:
 The first thing company can do is to gain the profits of the enterprise. Organisation can
accomplish this manufacturing the products by considering the tastes and the preferences
of the customers. Product price should be fix in such a way that it can cover all the cost
and gives the reasonable amount of profit. The manager of the company should take all
the elements to compute the cost of the goods (Miles, 2019).
 The cost of materials and the labour should be under controlled to reduce the spending of
over expenses. It means the funds of the organisation is effectively managed and there is
no wastage of funds and the resources. Through this organisation is able to save the
money by controlling the cost. The manager should impose penalty on the idle spending
of expense on the production process.

 The efficiency of the labour is measured by the working hours or the number of units
produced by them and the amount of the task is done in per hour. It helps to control the
labour cost of the company (Ostaev, Khosiev, and Klychova, 2018).
TASK 2
Analyse the decision of Mr. Amana to take the businesses in digital mode and give suggestions
to establish the own digital business or to merchandise on Amazon by decide the various
expense
The competitors of the Mr. Amana company is rising in the countries like UK, Europe
and the international countries. Company has decided to bring its business online and has two
options of taking online are:
 The organisation has bifurcated the sections of the Brighton, Birmingham and
Manchester by allowing the 50% sales on digital platform. The fixed expenses included
in this the charges of the web transportation, expense of setting the web, and the
installation cost of software and the expense of the insurance. There is conformity of
10000 units will sell annually. The total sum of the expenditure on the Amana Ltd is -
Expense of setting the transportation website = £ 150000
The above computation shows that company has the option to sell the products on the
Amazon by the payment of the starting charges. It gives the assurance for selling the 65000
products yearly to expand the demand of the goods (OV, 2018). The sum of the all expenses
occurred will be -
Amazon installation fees = £ 50000
The company has to spend the huge money to start its own digital platform because it has the
prime difference of £ 185000
Amazon is the largest online platform. It has the collected data of many consumers and the
clients. Company has better choice to do businesses on the amazon as compared to the self

website. There is huge money, time and expenses to spend on the designing the company
website.
There is the difference of fixing the online business and the amazon website
Basis Amazon Setting the online store
Reach It provides the information of
all the clients and helps to sale
up to 40% the goods.
It is very difficult in the online
store to make long term
relations with the customers.
Management The ownership to manage the
business is in the rights of the
amazon company. The Amana
ltd enterprise can not modify
the business with out the
approval of the manager of the
amazon company.
The manger gets the full
ownership to control the
businesses by fixing the online
website. The businesses has to
reduce the expenditure and
develop the site
personally(Roque, Alves, and
Raposo 2019).
Owned The right to spend the fund
will be in the hands of the
organisation and company has
no obligation to pay the
amount.
The owner of the organisation
has the responsibility to design
the internet site, convey it and
control the software
programmes. It should be
managed with in the projected
cost.
Information Organisation gets more data of
the consumers through the
digital retail businesses
(Pilipczuk, 2020) .
Company has to research more
data and to forecast several
sources to get more
information of the customers.
Protection It is very secured site and and
privacy protection to the
personal information of the
It has to develop ts own image
which includes huge time to

clients. It builds fidelity and
trust among customers.
evolve.
Control The businesses has get
minimum rights to regulate the
operations in the amazon
businesses. It has no right on
the pricing factors and the
return policy of the
commodity(Sahaf, 2018).
There is total power to manage
the business in its own way
and can alter the cost by
analysing the demand and
supply of the good. Owner
can change the price by
estimating the interest of the
customers towards the product.
This comparison aids to extract several results from this:
 There is immense expense is required in the own site to merchandise the goods as
compared to the amazon platform. It is less costly process or less investment is required
in the amazon source.
 The sales of goods or income generated through this is more safe in the online site with
the 35000 units as against with the amazon site. It means the proprietor of the Amana ltd
will receive more profit from this than the digital platform (Shevshenko, 2020).
 In the Amazon platform it does not give control on the operations of the business but it
gives major power to manage the company in self website.
 The status to manage the site or its maintenance will beard by the management of the
amazon organisation.
Hence, from the above report the proposal is transferred to Mr. Amana to initiate the business on
digital site. It gives the full ownership in the profits of the organisation. It helps to create more
income by expanding the sales (Vlasova, 2018).
CONCLUSION
It has been concluded from the given report that budget is the important statement that
has to be prepared by the every organisation. Enterprise can not only depend on the predicted
amount or figurers of the income and expenses. Budget is the fiscal statement and funds to be
apportioned on the respective departments. These figures always can not give the accuracy of the

information. This information has been taken to estimate the performance of the organisation.
The controlled report tells the spending of expenses on the monthly basis. The main objective of
this report is the check the variations in the standard or actual cost. The several recommendations
has been given to manager to increase the sales by controlling the variable expenses. In the last
Amana Ltd company has two alternative to initiate the business to sell the goods on the online
platform or to set up the own website (Zeff, 2019). The conclusion of this research that company
gets more advantage on establishing its own website. It provides power to control the business
operations but there is huge money involved in fixing its own website.

REFERENCES
Books and Journals
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Yee, H., 2020. Institutional logics and institutional work: radical reform of the Chinese public
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