Management Accounting Performance Report: Analysis & Improvement Plan

This report provides a comprehensive analysis of a family-owned tourism business in England facing challenges due to the COVID-19 pandemic. It examines the company's budget, identifies variances between budgeted and actual performance, and offers suggestions for improvement. The analysis covers sales, material costs, labor, and overheads, highlighting the adverse impact of the pandemic on profitability. Recommendations include maintaining the original sales price, leveraging online platforms for sales and marketing, investing in employee training, and utilizing business analysis tools like SWOT and PESTLE. The report also evaluates the options of developing an online platform versus selling on Amazon, emphasizing the benefits of e-commerce but cautioning the need for a balanced approach and appropriate strategies. The overall goal is to help the company navigate the challenges and improve its financial performance through effective management accounting practices.

MANAGEMENT
ACCOUNTING

Contents
INTRODUCTION...........................................................................................................................3
TASK A...........................................................................................................................................3
Preparation of Performance Report and Suggestions..................................................................5
Suggestions to improve the situation of the company.................................................................6
TASK B...........................................................................................................................................7
Analysis of proposed Decision....................................................................................................7
Assessment of the Profitable Option between usage of own website or Amazon.......................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
The managerial accounting is defined as the method used by the administration to manage the
various transactions which an organization is involved in, through implementation of multiple
rules and regulations led down by the government along with the company itself. The employees
appointed by the company need to follow such rules, policies, procedures, methods or
provisions, to effectively perform the operations (Panchenko, 2019). This concept helps
understand the why, when and by whom a task need to be executed, while keeping in mind the
technological, environmental, political aspects related to the ever changing and complex industry
structure. In the following report, the analysis and examination of a family owned business
related to tourism is performed, which is situated in England. The business has been active for
more than 40 years while successfully implementing every operation efficiently. The company
however, has been facing difficulties in operating the business successfully, due to the impact of
COVID-19 pandemic, where the government decided to propose and implement various
restrictions or barriers to minimize the movement of individuals. Furthermore, the report will
analyse the multiple expenses and costs, along with the suggestions which will help support the
decreasing profit. Henceforth, the company must apply management and cost accounting
concepts
TASK A
The statement of budget is described as the bench mark, led down for the income and expenses
for a relevant period, in order to avoid unnecessary consumption of the scarce funds and
henceforth drafting a systematic and complex policy for budget. The administration should
describe adequate policies and procedures, to execute the drafted budget as well as to mitigate
chances of violating the sanctioned limit defined by various authorities. For preparation of the
required budget, it is necessary to follow certain accounting principles and concepts, which must
be overseen by the management, to ensure whether the same are being followed or not by the
employees. For drafting the appropriate budget, following are the steps to be kept in mind:
 Preparation of the budget.
 Presentation and approval of the budget.
 Execution of the budget.
 Control of the budget proposed.

The company in case will be crucially benefitted by the various rules and regulations which are
to be proposed by those charged with governance towards the organization, where the employees
will be aided through such system, in the following ways:
1. In the current industry, the organizations choose to lay emphasis on daily transactions in
which the company is involved in and decides to lower the attention towards the long
term operations. In such case, the prepared budget helps ensure that the organization
focuses on merits which are long term in nature, in this manner the wealth can be
maximized along with the profitability of the company.
2. Considered as a rigid and complex tool of accounting, the budget is said to be prepared in
form of a statement which examines the monetary amount available towards every item
of the entity. Henceforth, management should efficiently and effectively manage the
scarce resources available and decrease the chances of over or under consumption.
3. The employees along with the management, are presumed to be well aware of the fact
that budgets are mandatorily followed by each employee or member and in line with the
compliance requirements. This in turn encourages them to perform better, while pushing
competitive behavior, if proper initiatives for the well performing individuals are
provided, who comply with the budget.
4. During the whole business process, the management requires proper and optimal
application of resources, so as to meet the budgetary requirements. This indirectly pushes
the employees to apply the available funds in a manner beneficial to not only the
company but also the employees, themselves (Adeyanju, 2021).
The budget is not considered a fair statement of the financial position of the company, where
every task is properly defined and analysed, while laying down the funds available for each and
every business item. It is based on unrealistic or inaccurate facts, or to put it in another way, the
budgets are prepared from assumptions and judgements based on an organization’s overall
business procedure and the activities performed in it.
Particulars Original budget Actual budget Variances
Quantity 100000 80000 20000
Selling price per unit 25 20 5
Total sale price 2500000 1600000 900000

Less- Variable costs:
Materials 250000 280000 30000
Labour 400000 440000 40000
Overhead 150000 120000 30000
Contribution 1700000 760000 940000
Less- Fixed overheads:
Warehouse rental 200000 170000 30000
Insurance 100000 100000 0
Fulltime warehouse
salary
50000 35000 15000
Profit 1350000 455000 895000
Preparation of Performance Report and Suggestions
The given report lays emphasis on the data presented via budget proposed by the management
and therefore defines the variance or deviations caused due to contingent or known events. In
this case, the estimated and actual costs deviate adversely, which implies that the performance of
the company has been negatively impacted by the pandemic (Dryagina, 2018). In year 2020, unit
which were sold by the company, declined from 100000 to 80000, along with the price being
decreased from $25 to $20. The impact of restriction applied by the government can be clearly
seen on the units which are sold, together with the fact that the demand witnessed a lower turn
with decrease in personal disposable income. To not incur significant amount of losses, the
company proposed to lower the price, so as to maintain their profitability position. Furthermore,
the raw material purchased for producing the finished goods increased, due to being not in use or
kept in cold storage (Marenych, 2019). The labour cost was calculated at $440000, however the
estimated amount was $440000, stating that the cost of labour was adversely impacted.
Moreover, the fixed overhead costs related to Warehouse rental, Insurance and Fulltime
warehouse salary, are also affected by the pandemic. This pandemic created an unfavourable

impact on the company, where not only the profit but also the costs are adversely deviated.
Concentration on the provisions and policies is extremely crucial for the company, to fill the loop
holes created during the COVID-19 pandemic. To implement such provisions, it is mandatory
that the management executes methods which help identify the cause behind each and every
deviation, for mitigating the effects of the same.
Suggestions to improve the situation of the company
The budget is drafted for each and every kind of organization, no matter what the nature of such
organization is, that is, its size, profit orientation, consumer base and other similar factors, is
mandatorily prepared. There may be certain inherent limitations or problems which affects the
budget of the company and they may not be able to act accordingly, however, can be mitigated
after such unfavourable situations occur (Schaltegger, 2018). For the company in case, that is,
Amana’s Ltd., should concentrate on the following factors to avoid such situation:
 As per the analysis through the budget, the company made the decision and acted upon it,
by reduction in the selling price from $25 to $20, which also impacted the revenue,
adversely. To pull the revenue back on track, the company needs to maintain the original
sales price of $25 and instead decrease the sales quantity of the products produced. As it
can be seen that the material costs of the company have also been significantly increased,
even though the sales are reduced.
 For a significant increment in the revenue, post the pandemic, the company should focus
on effective usage of the online platforms for providing sales and after-sales services.
With the social media platforms on the rise, the company can appoint influencer and
online marketing techniques, to help sustain in the modern environment, for a substantial
period of time.
 For staying true to the budget, the management will apply various provisions and
procedures which will definitely require training and development procedure to be
followed by the management to administrate the effects of the budget and ensure whether
the employees are capable of being in line with provisions led down by the company.
 The management may choose to apply the relevant tools and techniques of business
management so as to efficiently monitor the situation of the market and other underlying
conditions, through usage of SWOT or PESTLE analysis. This type of analysis will help

the organization to understand the situation of the competitors, while avoiding the cut
throat competition of such market (Boone, 2022).
 Due to a significant reduction in the wage rate of the employees, the management should
draft a budget which includes skilled and knowledgeable individuals, who can perform
multiple tasking and help the company predict the monetary value of the funds, which are
applicable on the natural as well as man-made resources of the company.
TASK B
Analysis of proposed Decision
Due to the pandemic, Amana Ltd. witnessed that many of the competitors choose to sell their
products online, through social media platforms. This resulted in the decision to apply such
technique in the company also, so as to garner maximum benefit from the online retail business
platforms. Furthermore, Mr. Amana decided to close the Brighton, Birmingham city centre and
Manchester city centre branches in order to streamline the business activities with the current
market conditions (Arnold, 2018). For setting up their own online shop, two relevant and
significant options are available to the company, stated as follows:
 Developing an online platform or website to sell products.
 Selling the products on Amazon, an online retail platform.
The company will be benefitted by usage of the online platforms, some of which are stated
below:
 Lower discovered prices and running costs than the offline business, because of the very
fact that the complete business method followed by the management is automated,
henceforward the corporate won't need to incur any costs regarding the rental look space
or the warehouse wherever merchandise are going to be sold (Karagiorgos, 2022).
 Any business entity operating through online platforms is not required to have a single
physical location to conduct business, but can operate from any location or region. For
example, the company of Amana's Ltd. is based in England, but may sell their products
worldwide using online platforms or websites.
 For aiming to sell in several countries, the management should focus on the concept of
scalability and propose various objectives which will help them gain better revenue. This

can drastically improve their position in the industry and as a result increase the wealth,
as their share value will increase in response to quality products sold.
 The online platforms provide the opportunity to present wide variety of products and
services to the consumers with the idea to target different consumer base and target the
available geographical area. Through following this method, the company can easily
establish themselves in the global market and optimally utilize the funds they raised.
 As the usage of online platforms often entails the usage of various systems and software,
therefore, it becomes easier for the companies to track the workings and sales as
compared to the offline method, where the man-power is given more significance.
Amana’s Ltd. may use systems like Google Analytics to track down the order details or
for examining the statistics for the same (Clikeman, 2019).
 Once the e-commerce website for any type of company is set up, they need not to
concentrate on running the same, every now and then. The systems are developed
through complex and critically analyzed coding processes or by appointing skilled
software engineers, who use machine language for effectively running the site.
The above benefits of ecommerce platforms are beneficial to the business as long as they employ
the right type of strategy for the right type of activity. However, each aspect has both positive
and negative factors that must be balanced in order to avoid negative effects on it. In this case,
the online platform may be of concern as consumer data may be hacked or the items available or
displayed may not match what the customer actually received. Additionally, companies that sell
online often ask customers to pay before the product is delivered. Often the consumer pays the
price, but the product is not delivered, resulting in a loss for the buyer.
Assessment of the Profitable Option between usage of own website or Amazon
The merits and disadvantages which are discussed previously, presents various aspects of the
organization, in context to the usage of online platforms, where the company needs to assess to
options available for conducting their business online through analysis of such options and
preparation of relevant statements (Holban, 2021). Details for the same are mentioned below:
(Option 1) If the enterprise proposes to promote its products online via setting up its personal
platform or website, then the following costs can be incurred on the market of 10000 units in a
year, in the event that they remain constant for such duration:

Setting up delivery cost £150,000.00
Upgrading cost due to manage the large
volume of data
£50,000.00
Salary of full time IT programmer £35,000.00
Total cost by set up their own website £235,000.00
If the sales for the year is estimated at £235,000.00, for 10000 units sold, then the price for each
unit sold would be £2.35.
(Option 2) The another option available to the company is to sell its products through usage of
the online platform of Amazon as a medium to perform business or as a “middleman” for the
company. For such purpose, the following expenses will be incurred and sales is estimated at
65000 units:
Amazon fulfilment fees £50,000.00
Total £50,000.00
It may be stated that the records furnished for Amazon is considered insufficient, because of the
reality that only the annual fulfilment expenses for availing Amazon’s services are furnished and
no different records are available. Henceforth, it can be feasible that the employer proposes to
sell its private or personal items and units the fee for the same, on its webpage. However, in truth
there stays the excessive possibility of losses now no longer most effective to the employer
however additionally to the dealer, because of lifestyles of the “go-back coverage” provision,
that means items might be back to the consumers. There is loss of pricing manipulate coverage
and the employer cannot estimate a dependable discern associated with the income of products
on Amazon (Samuel, 2018). Therefore, via the evaluation of each the options, it could be
proposed that the choice to sell products on their Own internet site is a lot extra useful because of
complete manipulate of the methods followed, in addition to the threat of higher revenue, which
can also additionally be earned via way of means of the employer. Simply put, Option 1 might
be worthwhile within side the lengthy run.
CONCLUSION
From the above report analysed for Amana’s Ltd., the company can easily identify benefits of
management accounting and how it can be implemented in the business processes. To better

understand the estimated cost of the company in case, a cost statement is also drafted which
defined the different types of costs incurred in course of furtherance of business (Mitev, 2018).
Both the parts of the presented report helps identify the different merits and demerits of e-
commerce platforms and how they need to be made part of an organization.

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