Management Accounting: Monthly Report Evaluation and Online Store Decision
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This report evaluates the monthly control report, original and flexible budget variances, and decision of Mr. Amana Ltd. regarding opening an online store and settling with Amazon. It also provides recommendations for improving the path.
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TABLE OF CONTENT INTRODUCTION...........................................................................................................................1 PART A...........................................................................................................................................1 Monthly report evaluation that present the flexible and original budget variances........................1 Computation of the financial year performance of the business by using monthly control report that are mentioned above:................................................................................................................3 Recommendation that are given to the manager of the Amana Ltd for improving the path.........5 PART B............................................................................................................................................5 Examination of the decision of the Mr Amana Ltd. Regarding the opening of a online store and elaborate the settlement of online merchandise with Amazon by observing the total cost.............5 CONCLUSION................................................................................................................................8 REFERENCES................................................................................................................................9
INTRODUCTION A budget refers an an ideal which mentions the level for earning of human being and the corporation.Thisassistinevaluatingtheneedofthemoneywhichwillneededinan organisation. This is a process to examine the capability of a business firm which expend money in a particular time which is set up through an organisation. Budget will be utilized to predict the position of financial of business and results in further time period(Hiromoto, 2019). This help to planning and analyse the performance or action of a company which can involve in expansion of fixed assets, functioning of training to the workers, setting up plan which is related to bonus and many more. The budget is being made on the basis of need of the company such as quarterly, monthly, half yearly and many more. This is very essential part to make a budget before putting action in plan of the project. This consists of expenses list and revenue. This process assist for earning the profit and to control over expenditure too. In this report, the discussion or examination mention the statement which is made on the base of the month and prepare or make the budget for Amana Ltd. That are evaluate and estimated the differences and variances. Examination of this performance or action which have been done in the time of pandemic. PART A Monthly report evaluation that present the flexible and original budget variances. Monthly control report -This helps in providing the important data that keeps both the cost direct and indirect such as wages, expenditures, salaries and overheads. This report helps in evaluating the operation activities cost for selecting the other cost that how to reduce the activity cost. It helps in furnishing of the internal data of the business that connectswith the upcomingincomeof the businessorthatcan occurin the future(Hutahayan, 2020). These type of income occur in the specific time period in the upcoming future . This report is basically prepared on monthly basis. This report assess the financial performance of the company. It aids organisation in taking correct decision in order to reduce the variance. 1
Original budget -This budget is totally depended on the past information that appeared the production and value level in last time. Managers of the business found this a very easy and simplest way to evaluate theperformance of the business entity in the upcoming future budget. This helps in analysing the earnings and the flow of income in thefuture organisation. This describes the difference between the fixed budget which can not be flexible and the real budget for identifying the status of the income and expenditures of the business firm . Flexible budget -This budget helps in adjusting the actual levels of revenue. This budget is also known as variable budget . This budget preparesa financial plan of prescribed revenues and values on the actual amount of output.This adjust the volume level of the company . This budget comes into force after completing the financial budget. It assist to focus on the specific cost that can be create in the business enterprise. It decides the variable and constant cost according to the actions. Flexible budget is distributed into two parts that is variable and semi variable. Variable cost are fluctuating and the semi variable cost are both fixed as well as variable also. Budget Variance -This shows the difference between the estimated and real budget. Budget variance is favourable when the actual expense is less than the budget andthe actual revenue is higher than the budget(Mahmoudianand and et, al., 2021). This an an term of accountingwhich determines example where actual costs are may be higher or lower than the predicted cost. Analysis of budget variance will determine the reason of failures. It helps in identifying the trends to bring success in the company . A negative impact of budget variance will reclined toward the shortfall of budget. 2
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Computation of the financial year performance of the business by using monthly control report that are mentioned above: There are certain steps which can be used for the evaluation of Amana Ltd monthly control report which are discussed below - Track the expenses -This is one of the important part of the financial budget that assists to monitor and having a record of the overall cost. By keeping daily records of the expenses like receipts , invoices and other expenses helps in betterment of the financial budget. This type of statements are made annually but the manufacturer overemphasize its plan to monthly(Ghasemi,and et, al., 2019). This helps managers in saving the cost and also in taking decision in future. Evaluation of the range that comprises excess expenses -It represent the evaluation of budget during the planning and it also helps in analysing that specific area which charge extra cost and also try to reduce the cost and expenses by taking the decisions correctly and efficiently. 3
Oversee and evaluate the space that contains over cost -In this the manager of the company do comparison and direct the area that carry an high cost or low cost on the particular operation of business activity at the time of planning with the help of these steps(Nielsen, 2018). Analysation of the budget that is prepared for the Amana Ltd. Monthly report are discussed below: Flexible budget reflects the less trade revenuein comparison of real budget. It reflects that the business has to increase and maximizethe level of production while increasing the selling price. It assists organisation to increase the level of income on annual basis. The product selling price is£25 and 100000 units are alreadysoldaccording to the original budget. It reflects that the basic budget is lower than the original budget. Due to the differences in the cost business enterprise can also get changed. Raw materials and variances of law carry very high cost. The cost is£280000 which is exactly 10% less than the real cost and the selling price is 10% per unit this is according to the real budget. So the entity has to reduce the cost of raw material which help in recapture of expenditures(Bracci, and et, al., 2022). Manufacturer assist the production of unit which is usually done monthly by them . In flexible budget the direct cost are getting reduced due to which h the labour costare getting minimized.. On the basis of precious plan , the business gross profit is getting reduced by 55.29%. operational activities are related with the result of the income and revenue that reflects the gross profit and also the expenditures of the organisation. Overheads which are constant or same areexamine in the storage lase, remuneration and securities also . Funds that are in the beginningthat are achieved from the present idea are more higher than the last constant cost. Previous ideas has more benefits for the business corporation because the current profit is less by 66.30%from the previous one . This should be closed for declining the 4
expenditure of both fixed as well as variable also. With the help of budget the company can view the status of the organisation. Recommendation that are given to the manager of the Amana Ltd for improving the path. The main purpose of the company is to focus on the profitability of the organisation. This is recommended to the manager of the company that they should concentrate on the manufacturing of the products unit for increasing the level of production so that they can increase the quantity of product in business firm. When it comes to the cost then the firm should work on it precisely and with utmost sincerity(Gogaev, and et, al., 2019)). Above mentioned things are very important for the organisation so it should be consider in appropriate manner. The manager as well as owner of the Amana Ltd both should be aware about the price of the raw material because it affects the real budget . Wastage of any material can lead to increase the funds and can also increase the material cost. Sop the managers should need to make the plan or a strategies to look on this. It is also recommended to the manager that they should not do any kind of change or modification in labour cost because the labour cost affects the production of the business. It can reduce the production unit by minimizing the labour cost . PART B Examination of the decision of the Mr Amana Ltd. Regarding the opening of a online store and elaborate the settlement of online merchandise with Amazon by observing the total cost The members at Amana Ltd.are setting up their online stores in several nations like United Kingdom, United States and Europe. The company have to adopt the modern techniques such as online trade rather than the traditional way. Mr Amana Ltd. has done its 50% of its online sales in Manchester and Brighton(Gottlieb, and et, al., 2021). The company have to consider their fixed costs for compensation such as the transportation costs, social sites costs and coding costs. Beyond the fixed costs the company have make sure that they will sell 100000 units in the financial year. The costs which can be incurred are explained below- 5
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Mr Amana Ltd. Can use different alternatives for trading their goods and services through Amazon, in which they can give them lump sum payments for their satisfaction. The company have to make sure that they are selling 65000 units in the financial year and also have to engage in making the marketing strategies to raise the demands of the products. The total cost which can be incurred is written below- Amazon is a recognized brand and it is a brand which used by many individuals around the world. The brand is having a different identity of providing quality of goods at lower prices. The brand is having a global reach among its customers, which simply means it is having a huge customer base(Juliana,Gani and Jermias, 2021). For Mr Amana Ltd. It is necessary to trade through online platforms to reach maximum number of customers. If the company is thinking of setting up their official website than it will need a lot of time and huge amount of capital investments. This will reduce profit as the cost will be increased. Differences between setting up the official website and doing business with Amazon are described below- BasisAmazonDeveloping online store ScopeAmazon already have a large consumer base which will be a benefitforthecompanyas they can opt for the 40% of Developing new website will require time and it is difficult tobuildthecustomers immediately. 6
their sales from Amazon per year. ManagementThewebsiteofAmazonis handledbytheirmanagers. Thereisnoneedofany personnel of Mr. Amana Ltd. While doing the business with Amazon. Theownerofthebusiness have to manage the website as thecompanyisasole proprietorcompany.Ifthere are any changes in the website then they can be done by the owner easily. CostThe cost required for doing the businesswithAmazonis £50000. Thecompanyisrequiredto broughtupacapitalof £235000 if they have to set up their own website. There are many expenditures which will be incurring while setting up the website. DataAmazonishavingahuge amount of data of many sellers whichwillhelpMr.Amana Ltd. In dealing with the trade of products and services. Thecompanyhavetodoa research for developing their ownwebsite.Thecompany have to start from scratch and have to face a lot of issues whilecollectingthedesired information about customers. ControlAmazonwillnothaveany control over their costs and the policieswhichhavebeen draftedon the returnof the goods and services. If they launch their own site then they are able to overcome the changes or modification in thepriceandquantityof commodities . 7
From the above differences, it can be examined that- If the company will opt for their own official website then they have to introduce heavy amount of capital(Massicotte and Henri2021). Whereas doing business with Amazon will incur less costs for the company and they can earn more profits. So it is more convenient to invest in Amazon for their online trading of products and services. Through Amazon the business can have a surety that they can sell more rather than from their own website. They can sold 35000 units more than there own website by using Amazon. If the company is opting for Amazon then the company do not have to manage the website but if they select to build their own website then they will have to hire a manager which can help them managing the website. It is suggested for Mr. Amana Ltd. From the above report that if they use their own website for selling goods and services then they have to achieve the highest sales in order to gain profit. CONCLUSION From the above report it is concluded that the business and the individuals should not be dependent on budgeted value or other sources which come under the head of cash and the revenues. It is important for the managers to prepare monthly control report as it helps in providing data like direct and indirect wages and salaries. This report helps in the evaluation of the costs which have been incurred in the particular month. For a company it is important to get a overview of the original budget which can be on the past information or past sales. Also the company is needed to make a flexible budget which helps them in adjusting the actual levels of the revenue. The flexible budget prepares the sheet of the actual values and the actual amount incurred. This report is the evaluation of the monthly control reportof the company. The main purpose of this report is to examine the differences which can be incurred between the real budget and the basic budget which is made. Also the analysis is made on whether the company should made their own website or use Amazon. The company is suggested to opt for Amazon as they have global reach and have access to many customers. The company can sell more products and earn more profits by selling through Amazon. 8
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REFERENCES Books and Journals Hiromoto, T., 2019. Restoring the relevance of management accounting. InManagement Control Theory(pp. 273-288). Routledge. Hutahayan,B.,2020. Themediatingroleof humancapitalandmanagementaccounting information system in the relationship between innovation strategy and internal process performance and the impact on corporate financial performance.Benchmarking: An International Journal,27(4), pp.1289-1318. Mahmoudianand and et, al., 2021. Inter-and intra-organizational stakeholder arrangements in carbon management accounting.The British Accounting Review,53(1), p.100933. Ghasemi,and et, al., 2019. The effectiveness of management accounting systems: evidence from financial organizations in Iran.Journal of Accounting in Emerging Economies. Nielsen, S., 2018. Reflectionson the applicabilityof business analyticsfor management accounting–andfutureperspectivesfortheaccountant.JournalofAccounting& Organizational Change. Gogaev, and et, al., 2019. Zootechnical and management accounting factors of beef cattle: cost optimization.Researchjournalofpharmaceutical,biologicalandchemical sciences,10(2), pp.221-231. Juliana, C., Gani, L. and Jermias, J., 2021. Performance implications of misalignment among business strategy, leadership style, organizational culture and management accounting systems.International Journal of Ethics and Systems. Massicotte, S. and Henri, J.F., 2021. The use of management accounting information by boards of directors to oversee strategy implementation.The British Accounting Review,53(3), p.100953. Gottlieb,and et, al., 2021. Institutionalised management accounting and control in farm businesses.Scandinavian Journal of Management,37(2), p.101153. Bracci,and et, al., 2022. Risk management and management accounting control systems in publicsectororganizations:asystematicliteraturereview.PublicMoney& Management,42(6), pp.395-402. 9