Management Accounting and People and Organisation Management in the Built Environment

This report covers the preparation of monthly control report for Amana Ltd, report on Amana’s performance, recommendations to improve the performance of Amana Ltd and analysis of two alternative methods for online selling.

PEOPLE AND
ORGANISATION
MANAGEMENT IN THE
BUILT ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
PART A...........................................................................................................................................3
Preparation of Monthly Control Report for Amana Ltd..............................................................3
Report on Amana’s performance.................................................................................................5
Recommendations to improve the performance of Amana Ltd...................................................6
PART B............................................................................................................................................7
Analysis of two alternative method for online selling.................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is the branch of accounting that comprises the elements of both
financial and cost accounting. Management of people and organization is essential for the
desirable performance of the business entity. The report will prepare original, flexed and
variances for Amana Ltd. Based on the budget report the study will report the performance of the
company and suggest the improvements. Two selling options will be analyzed and best will be
advised to the firm.
MAIN BODY
PART A
Preparation of Monthly Control Report for Amana Ltd.
Amana Ltd
Original Budget Report
Original Budget Actual Variance
Favorabl
e /
Unfavor
able
Per Unit In
Amount
Per
Unit
In
Amoun
t
Per
Unit
In
Amou
nt

Units 100000 80000 20000
Selling Price 25 2500000 20 160000
0 5 90000
0
Unfavora
ble
Variable Cost:
Materials 2.5 250000 3.5 280000 -1 -30000 Unfavora
ble
Labour 4 400000 5.5 440000 -1.5 -40000 Unfavora
ble
Overhead 1.5 150000 1.5 120000 0 30000 Favorabl
e
Contribution 17 1700000 9.5 760000 7.5 94000
0
Unfavora
ble
Fixed Overheads:
Warehouse Rental 2 200000 2.125 170000 -0.125 30000 Favorabl
e
Insurance 1 100000 1.25 100000 -0.25 0
Full time warehouse
supervisor salary 0.5 50000 0.437 35000 0.062 15000 Favorabl
e
Profit 1350000 455000
The above budget report shows the variances between the original budget
prepared by the company for the year 2020 and the actual events for the year. Sales
and production volume are assumed to be same. The variance in the sales and
production units, materials, labour and overhead are unfavourable for the company.
Variance in the warehouse supervisor salary and warehouse rental is favourable for
the company. There is no variance in the insurance overhead as it is same as the
budgeted amount.
Amana Ltd
Flexible Budget Report
Original Budget Flexible Budget

Per Unit In Amount Per Unit In Amount
Units 100000 80000
Selling Price 25 2500000 25 2000000
Variable Cost:
Materials 2.5 250000 2.5 200000
Labour 4 400000 4 320000
Overhead 1.5 150000 1.5 120000
Contribution 17 1700000 17 1360000
Fixed Overheads:
Warehouse Rental 2 200000 2.5 200000
Insurance 1 100000 1.25 100000
Full time warehouse supervisor salary 0.5 50000 0.625 50000
Profit 1350000 1010000
Flexible budget report is prepared to adjust the budget as per the actual
production and sales unit. In the above original budget report the variances were
calculated on the basis of budgeted figures and their difference with the actual
figures. But there was difference in the unit produced and sold by the firm in both
the budgeted and actual figures. So to get the clear picture regarding actual
variances flexible budget is prepared.
Amana Ltd
Budget Report
Flexible Budget Actual Variance
Favorab
le /
Unfavor
able
Per
Unit
In
Amount
Per
Unit
In
Amou
nt
Per
Unit
In
Amoun
t
Units 80000 80000 0
Selling Price 25 2000000 20 160000 5 400000 Unfavor

0 able
Variable Cost:
Materials 2.5 200000 3.5 280000 -1 -80000 Unfavor
able
Labour 4 320000 5.5 440000 -1.5 -
120000
Unfavor
able
Overhead 1.5 120000 1.5 120000 0 0 Favorabl
e
Contribution 17 1360000 9.5 760000 7.5 600000 Unfavor
able
Fixed Overheads:
Warehouse Rental 2.5 200000 2.125 170000 0.375 30000 Favorabl
e
Insurance 1.25 100000 1.25 100000 0 0
Full time warehouse
supervisor salary 0.625 50000 0.4375 35000 0.187 15000 Favorabl
e
Profit 1010000 455000
The above budget report shows the difference in the actual figures in comparison to the
budgeted figures.
Report on Amana’s performance
Its is reported that Amana Ltd Sold less units than the budgeted units. The budgeted units
were 100,000 units but the company produced and sold only 80,000 unit for the year 2020. This
variance of 20000 units is unfavourable for the firm as it shows the inability of the firm to
produce and sell the units expected. The selling price per unit was expected to be £25 per unit
but the actual per unit price for which the company sold its products is £20. The variance in
selling price per unit is unfavourable for Amana as it results in earnings of less profit for the
financial year 2020. Further it is reported that the per unit material cost was expected as £2.5.
The actual cost incurred on materials amount as £280000 for 80000 units that are produced
during the year. The budgeted cost on materials for 100,000 units is £250000. It shows more
expenditure incurred on materials even when the units produced were less then the budgeted
units. Further the per unit labour cost as per the amount in budget is £4 but actual cost paid per

unit is £5.5. The variance of 1.5 pounds per unit is adverse for the company.Total labour cost as
per the flexed budget prepared is £320,000. however, Amana Ltd recorded total of £440,000
expense on labour. The variable overheads flexed for the year 2020 were expected as £120,000.
The firm’s overhead expenditure is £120,000. It shows that the overheads expenses were as
expected. There is no overhead expense, it means that the expense is neither favourable nor
adverse for the company. Rent on the warehouse used by the company provided for an expense
of £200,000 in the budget prepared but the actual amount paid for rent is £170,000. The variance
of £30,000 is favourable for the company as the expenditure incurred is less than the expected
expense. Insurance expense is budgeted as £50000 and the insurance paid is the same amount.
The variance is not favorable or unfavorable for the company. The salary of supervisor working
as full time employee has a difference in budgeted and actual expense. This difference is
favorable for the firm by £15,000. As per the original budget the profit expected to be earned in
the financial year 2020 is £1,350,000. The flexible budget prepared on the base of actual units
produced and sold shows that standard profit to be earned by the firm as £1,010,000 but the
actual profits made by the firm are £455,000. Less number of units produced and sold along with
the adverse variances in the variable costs resulted in generation of low profit by the company. It
is further reported that the performance of the was not as expected. There were various reasons
behind the weak performance of the company. Company had adverse variances in materials,
labor, overhead and sales units.
Recommendations to improve the performance of Amana Ltd.
It is recommending for the company to analyse the product and bring changes in the
features or qualities of the products offered. The products must to made more attractive to initiate
the consumers for making instant decision to purchase. The unnecessary features in the product
can be eliminated to reduce the cost of production the firm incurs in producing the product. This
will allow the company to attract more number of customers by offering products at more
affordable prices (Colwell and et.al., 2018). The marketing activities by the firm should be the
core of focus to increase the number to consumers purchasing the products of the company. The
cost reduction techniques will help the firm to reduce the cost of production. Selling the products
at low rates will result in earning of low profits by the firm for short period but it will definitely
increase the number of units sold by the firm. Currently the goods sold by the company are
produced by a Chinese manufacturer that produces the products as per the design provided by

Amana Ltd. Company should start producing the products on its own rather than by the other
manufacturer (Jena, Tripathy and Pal, 2021). Or the other alternative can be that the firm gets it’s
products manufactured by some other manufacturer who manufactures the products and provides
them to sell to the company at lower price then the current manufacturer of the company. The
variance in materials used during the production process by the firm can be reduced by
bargaining with the current supplier of the firm. Also, new suppliers should be approached by the
firm to discover suppliers supplying the materials at lower rates. The process of production must
be analyzed to identify any kind of activity that results in using up of more material or wasting of
materials in the process of making up of the final product sold by the firm (Esmailzadeh and
Nikbakht, 2019). Wastage of product is a major reason behind using of excess material at various
firms. Further it is recommended for the company to look for alternate materials available at
lower prices and can be used by the company in its production process. Production in bulk will
allow the firm to have benefits of economies to scale. Ordering raw materials in large quantities
can be economical for Amana Ltd. Variances in the labour cost can be improved by the firm
looking for the labour in the regions where the labour are available at lower prices. Proper
training to the staff of the company will help in improving the variance and making it favourable
for the company. Staff of the company should be kept motivated and encouraged to improve
their efficiency. The equipment used by the labor in performance of their job roles should be
maintained and kept in working condition to facilitate fast and efficient work. The quality of
materials and type of materials used in the production by the company should be well known by
the workers also they should know the proper care required for handling of the materials
correctly to avoid the over usage of material by waste generation (Vu and et.al, 2022). The
supervisor of the firm should be reviewed on the basis of supervision provided by him. Effective
supervision is very essential for checking or follow up of the production plan. Through good
supervision both labor and material variance can be improved by the firm.
PART B
Analysis of two alternative method for online selling
Alternatives Sell on Own Online Shop Sell on Amazon
Costs Setting up cost £150,000 Fulfillment £50,000

fees
Upgrading Cost £50,000
Salary of IT
programmer
£35,000
Total Cost £235,000 £50,000
Guaranteed Sales 100,000 units 65,000 units
The two alternatives available with the Amana for selling its products online are either it
can make its current online selling website more advance to support the greater needs of the
company or by selling on a renowned online selling platform Amazon. The above table shows
the summary of each of the alternative available. The foremost alternative have a total cost
requirement of £235,000. This cost is £150,000 for setting up of the website. Upgrading the
online platform needs an expense of £50,000 to be made. The firm additionally requires to
appoint an IT programmer for handling all the online selling website related work for the
company.The guaranteed sales with this alternative if 100,000 units yearly. The other alternative
of selling on Amazon will require a payment of £50,000 as fulfillment fees to the platform.The
guaranteed sales by selling with this alternative is 65,000 units annually. As per the cost
perspective the most viable option is to start selling on Amazon by paying only £50,000 as
fulfillment fee. Selling on Amazon will result in less of autonomy by the firm on the pricing and
return policies.
Making the products available on the current website through upgrading it for supporting the
higher sales volume will require high promotional and advertising expenses to make people
aware about the website (He, Gupta and Mirchandani, 2021). Targeted audience will have to be
made to trust the website of the company. It is advised for the firm to select the second
alternative and sell its products on Amazon. Selling on Amazon will provide a grater market
reach to the products of Amana Ltd. At present the guaranteed sales units is less as compared to
the other option of selling through company owned website but in long run the selling decision
on Amazon will be beneficial for the firm. The potential growth in the volume of sales is
definitely higher in this alternative. Further the lack of autonomy over the pricing will prove
advantageous for the firm as less time will be spent in deciding the pricing strategy to be used
(Ediwarman and Pahamzah, 2020). The competitors based price analysis will be made easier. In
addition the return policy by the online platform is somewhere the base for the customer

engagement being higher and if the products sold by the company are of good quality satisfying
the needs of the customers then the number of orders marked for return or replacement will not
be a problem for the company.
The competition faced by the company by selling on Amazon will be very high as large number
of seller already sells on Amazon but the products offered by the company are customized and
designed specially by the designers of the company (John, 2020). Thus the competition will
make the company’s employees more creative and encourage them to make best designed
products. Amazon selling option will be cost effective for the company as the marketing cost will
be very low as compared to the cost of marketing that will be incurred on marketing of the
products on the website owned by the company. Selling on Amazon is advised because it will
give the company the credibility of a seller automatically. Company will additionally have a
global reach. The maintenance charge will be low for the company when it decided to sell on
Amazon. Issues regarding technical problems and website upkeep will not have to be managed
by the firm.
Further the another reason behind advising the alternative to sell on Amazon for the company is
that company can save on its warehouse cost by using the warehouse space provided by the
platform to its sellers. The growth prospect of selling on Amazon is higher as the platform
already have large number of trusted buyers (Zhang, Ma and Rauch, 2019). Company also have
the future benefit of diversifying its product portfolio and selling in on the online platform
among the already available global customers to purchase its products.
The amount generated by the firm by selling its products on Amazon will be securely
deposited in its bank account. The order that the firm will receive for its products will be shipped
by the company hence the firm will not have to worry about the shipment of the order that will
be received. The additional support provided by the app to the sellers include services of product
photography, management of account, etc (Sell on Amazon: Become an Amazon seller, 2022).
The brand name and logo of Amana Ltd will be featured on the product pages of the app and
website. Further targeted advertisements can be uploaded by the company.
Thus looking at the involved cost involved in both the alternatives the cost effective
alternative is selling on Amazon. From the view points of technicalities involved favourable
alternative to sell on Amazon. And from the growth perspective the alternative is best advised to
the firm.

CONCLUSION
Based on the report the original, flexed budget and variance importance has been
prepared. The report has discussed the improvements. Further the report has selected alternative
to sell on Amazon for the firm.

REFERENCES
Books and Journals
Colwell, J. C. and et.al., 2018. A randomized controlled trial determining variances in ostomy
skin conditions and the economic impact (ADVOCATE Trial). Journal of Wound,
Ostomy, and Continence Nursing. 45(1). p.37.
Ediwarman, E. and Pahamzah, J., 2020. ONLINE SELLING REGISTERS IN FACEBOOK
GROUP SELLING AND BUYING ANYTHING AND THE IMPLEMENTATION OF
THE. Kajian Linguistik dan Sastra. 5(2). pp.145-154.
Esmailzadeh, N. and Nikbakht, R., 2019. Comparison of Variances Homogeneity Tests in
Randomized Complete Block Design. Journal of Statistical Sciences. 12(2). pp.323-340.
He, B., Gupta, V. and Mirchandani, P., 2021. Online selling through O2O platform or on your
own? Strategic implications for local Brick-and-Mortar stores. Omega. 103. p.102424.
Jena, A. K., Tripathy, M. R. and Pal, N., 2021. Alternative estimation of the common mean of
two normal populations with order restricted variances. REVSTAT–Statistical
Journal. 19(3). pp.327-362.
John, P., 2020. ONLINE SELLING REGISTERS IN FACEBOOK GROUP SELLING AND
BUYING ANYTHING AND THE IMPLEMENTATION OF THE LEARNING OF
INDONESIAN LANGUAGE IN SMA. Kajian Linguistik dan Sastra. 5(02). pp.145-
154.
Vu, H. L and et.al, 2022. Analysis of input set characteristics and variances on k-fold cross
validation for a Recurrent Neural Network model on waste disposal rate
estimation. Journal of Environmental Management. 311. p.114869.
Zhang, H., Ma, J. and Rauch, J., 2019. Optimizing Offline and Online Selling Prices in a
Monopolistic Environment. The Journal of Applied Business and Economics. 21(4).
pp.169-177.
Online
Sell on Amazon: Become an Amazon seller. 2022. [Online]. Available
through<https://sell.amazon.co.uk/>