Management Accounting: Control Report, Performance Analysis, and Online Business Decision

This report discusses the control report of Amana Ltd, which helps to evaluate the performance of the company. It includes an analysis of the budget variances, recommendations for improvement, and a comparison of costs between setting up a personal website and selling on Amazon. The report also provides insights into the decision-making process for establishing an online business.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
A.Prepare the control report which shows the real, flexible budget and the budget variances on
monthly basis. ............................................................................................................................3
B. Estimate the performance of the Amana Ltd by using the control report in the year 2020
that is discussed above................................................................................................................4
C. Recommendations to the manager of the Amana for improvement of the areas...................5
TASK-2 ...........................................................................................................................................6
Analyse the decision of the Mr. Amana for establishing its business online or to fixed his self
online shop or to sell on the website of the Amazon by contemplating all the elements of cost
.....................................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Budget is an document of forecasted revenue and cost to be occurred in future period of
time. It gives the idea to the organisation how much company will spend the expenses on the
business and estimate the funds on different departments. It is used to analyse the financial
performance or position of the entity. It is the important tool of the planning function. It includes
the preparation of the master budget which means the summary of the documents of budget. In
this report organisation has prepared the control report that helps to control the cost and to
identify the variances. Control reports helps to measure the performance of the company and to
monitor the operations of the business (Akbari, and Pourzamani, 2018). In the last company take
the decision to set up the own website or bring out its business in to the online mode. It helps to
estimate the pros or cons of fixing the own website or to pay the cost to the amazon company.
PART A
A. Prepare the control report which shows the real, flexible budget and the budget variances on
monthly basis.
Monthly control report: It is the report which is prepared at the end of the month, yearly or
annually. It denotes the amount of expenses direct or direct such as trading expenses, workers
salary, administration cost, selling or distribution cost and production expenses. This report
provide advantage to compare the real cost or income with the predicted expenses to find out the
deviations. Through this it helps to mitigate the cost and reduce the spending on redundant items.
It is key measurement tool which furnishes the management to see those areas of the company
that requires some improvement and those meet the criteria of the budget goals. The control
report mention the particular characteristics or traits and provide the several information
regarding the budget variances (Birjandi, Khodamipour, and Pourheidari, 2019).
Real budget: The budget that is build on the relay of the past information and expenses is
known as the original budget. It gives the data about the current level of production also. It will
make the easier for the budget manager to predict the position of the enterprise in the present or
future years. It will give the clear picture how much company can sales the good and earn the
profit from that.

Flexible budget: It is the budget which alters due to the flexibility in the production level or
volume. It is more comprehensive than the fixed budget. This budget is changed with the level
of output. This budget utilize the income or expenses incurred in the present level of production.
Budget variance: It is the financial term which indicates the possibility of actual cost may be
lower or higher as compared to the standard or budgeted expenses. The outcome of the budget
results may be positive or negative. The favourable result of the budget means budget has meet
the expectations of the business and organisation has earned more revenue. The negative
consequence of the budget represents that company has spend more money on the expenditures
that reduces the profit of the business (Christensen, Greiling, and Christiaens, 2018). In the
whole time company should managed its budget in optimised manner to achieve the specific
goals and targets. The deviations in the budget has severe impact on the profits of the enterprise.
The time and cost involved in making the budget is huge so it is difficult to bring frequent
changes in the reports.
The following is the budgeted control report of the Amana Ltd :

B. Estimate the performance of the Amana Ltd by using the control report in the year 2020 that
is discussed above
These are the phases that is used by the manager of Amana Ltd to examine the monthly control
report.
1. Monitor the cost: It is crucial for the organisation to keep record of the each and expense
incurred in the business. Sometimes company has to pay huge amount for the collection
of the minor expenses. Company prepared the financial statements at the end of the year
so the information of the expenses spent on the manufacturing department will be get
from the budget. The proprietor of the company should record all the monetary expense
by making the statement of the cost on the monthly basis. The analysis of the budget
variance aids the manager to take the conclusions for saving the expenses (Helmy,
2018).
2. Identify the excess cost area: By analysing the control report it helps to determined those
sections where organisation pay the more money on the expenses and to overlook the
fund spend on to store the excess stock. Company has locked the fund in the purchase of
inventory. This measurement helps in the management of the inventory.
3. Determine the portion of spending of extra fund: The management has to ascertained
those areas where organisation spent the major proportion of the fund on the execution of
the budget strategy. Through this company will be able to know the essential parts of
outlay the expenditure. It has observed that the production should be increased in turn
units will also rise to cope up to meet the increasing cost of the product.
From the above budget organisation has concluded several analysis:
 The real budget of the company has incurred more sales than the flexible budget. It
means enterprise has to produce the units in the bulk quantity to get the lower price of
per unit. This cost efficiency method will helps to increase the sales of the company. It
aids to gain the higher profit through out the year. The selling cost is £ 25 and 10000
products sold in the real budget (JulyLehner, and Harrer, 2019). The amount is higher
than the budgeted cost. The differences of between two cost has impact on the company
operations.

 There is huge deviations between the material cost and the labour. In the original budget
the percentage of selling cost is 10 and the actual expense is £ 280000 that is more than
10%. Therefore the organisation has to cut down the material expenses that aids to cover
the expenses.
 The units has been produced on the basis of the month the declining unit of the labour
means it enhances the productivity of the employees and reduce the direct cost.
The gross profit of the company is less than its primary data by 55.29%. The result of the
revenue and the expenses is showed in terms of the net income. Therefore there should be
balance between the cost and revenue (Moll, and Yigitbasioglu, 2019).
 The fixed expenses or overhead includes the storage lease, salary of the warehouse
keeper and the securities. The fixed cost of the last figure is less from the stating fund.
 The net profit of the organisation is shortfall by 66.30%. The reduction in the profit will
affect the growth and the development of the company. It will destruct the financial
performance of the organisation. It means to control the expenses as well as the cost of
different departments.
C. Recommendations to the manager of the Amana for improvement of the areas
There are many suggestions which is analysed from the performance report of the
business:
 The first concentration is to increase the income of the organisation. Company can
sustain this by producing the quality goods according to the needs of the customer. The
profit can be increased by maximising the sales of the products. Company should
consider all the factors to decide the price of the product it is the crucial steps and can
have negative impact on the profit of the company (Montenegro, and Rodrigues, 2020).
 The management of the organisation must concentrate on how the cost of direct material
budget is higher than the real budget. It means the resources of the fund is idle and there
is wastage of resources. It is required for the manager to research the study to take the
strict action to lower the wastage of money (Ng, 2018).
 The expenditure of staffs is fixed by the manger and it can be decreased from the basis of
units of production and the task done by the staff per hour. It helps in the proper
distribution of the funds.

TASK-2
Analyse the decision of the Mr. Amana for establishing its business online or to fixed his self
online shop or to sell on the website of the Amazon by contemplating all the elements of
cost
The competitors of Mr. Amanas company is rising in the countries such as UK, Europe and the
US. It has been decided to transform the business in to online and the two options of going
online business are:
 The company will divide the area of Brighton, Birmingham, and Manchester by putting
the 50% online sales. The static cost will be included in the business such as the
compensation for fixing the transportation web, cost of designing the website, software
installation expense and the insurance cost. Excluding this there is assurance of 10000
units of revenue yearly (Padovani, and Iacuzzi, 2021). The total expense of Amana Ltd is
-
Cost of fixing the website of transportation = £ 150000
Cost of rising the internet website to preserve the huge data of sales = £ 50000
Salary of the full time IT employee = £ 35000 per year
Sum of total expenses = 150000+50000+35000 = £ 235000
 The above calculation shows that the organisation has the alternative to sell the goods on
the Amazon by paying the initial charges. It renders the surety of sale of 65000 units
annually to increase the demand of the product. The total cost incurred will be -
Amazon set up fees = £ 50000
Therefore, the organisation has to pay more money to open the self online platform and it has
the major difference of £ 185000
Amazon is the well renowned platform. It has the database of several customers and the
clients. It is good option to to business on amazon rather than to set up the personal website. The
individual has to spend huge cost, time and money to start the own website (Sellami, and Gafsi,
2019).
The difference of setting the online store and the amazon website
Basis Amazon Fixing the digital store

Reach It has the collected data of all
the customers and can trade
the goods up to 40% on
business.
It takes the long time to fix
the digital store and to attract
the customers.
Management The control of managing the
businesses will be in the hands
of the amazon organisation.
The seller has the partial rights
and can't change it on frequent
basis.
On setting up the online
website the manager has direct
control over the businesses
operations. Company has to
control over the operational
expenses of the company and
can take care of the website
personally.
Owned The power of spending the
expenses on the trade will be
managed by the company if
seller is not interested on this.
The owner of the company has
the status to design the web
page, interpret it, manage the
software. It can be controlled
with in its budgeted price.
Cost The expense incurred to sell on
the amazon site will be £
50000 in differentiate to set its
own website.
The result to sell the goods on
the self website is required
huge amount of funds. The
compensation of £ 235000 is
the big amount.
Data Company gets more
information of the customers
on the online retail shop.
Company has to initiate from
the beginning to accumulate
the more data about the
customers.
Protection Amazon is the known website
for everyone so it develops
trust or security among the
customers. It provide data
It has to build its own
goodwill which takes many
years to develop.

privacy to the customers.
Control The company has only limited
powers and does not get
control on the pricing
mechanisms and return policy
of the goods.
The full control is in the hands
of the owner and can change
the price according to the
demand or supply of the
product and renders return
policy to the customers.
This differences helps to analyse the several factors-
 The cost of making the own website involve the more cost than to trade the business on
the amazon. The investment in the Amazon will be beneficial for the company in terms of
the expenses.
 The revenue earned from the sale of the product is much more secured on the online
website by 35000 units as compared to the amazon. It shows that owner of the Mr.
Amana company will receive more receipt than the Amazon.
 On the amazon Mr. Amana can not control the business operations but it has controlled
over the online shop (Sheshukova, and Mukhina, 2018).
 The control of managing the internet site or the maintenance expense of site is faced by
he amazon company.
Therefore, from the above research the advice is given to Mr. Amana to start its online business
because at the end the net profit of the company is visible. It renders to create more profit by
increasing the sales (Tilt, 2018).
CONCLUSION
From the above report it has been determined that company should not be relay fully on
the estimated figures of the sources of the cash and the incomes. Budget is the financial
document that renders the overview of the expenses that is distributed on the departments. These
amount does not renders the accurate data. The data has been considered to analyse the business.
In this report the case study of Amana Ltd is discussed. The monthly control report helps to
evaluate the performance of the company. The prime purpose is to check the the difference

between the budgeted and the actual cost. The suggestions has been given to the manager that
profit is the important part for the stability of the company. The proposal has been given to Mr.
Amana that he should prosper his business by starting a shop on the amazon or to create the own
site. The consequence of this study is to set up the website due to assurance of the sales. This
helps the Amana Ltd company to increase the income of the business than from the amazon site.
The amazon site gives no control over the businesses trade rather than the businesses on own
website that provide the major control on the business.

REFERENCES
Books and Journals
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Sellami, Y.M. and Gafsi, Y., 2019. Public management systems, accounting education, and
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Sheshukova, T. and Mukhina, E., 2018, October. Environmental accounting in digital economy.
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