Management Accounting Report for Amana Ltd: Evaluation of Budget and Suggestions for Improvement

This report evaluates the efficiency of Amana Ltd in the financial year 2020 and provides suggestions for improvement. It includes an evaluation of the monthly control report, original and flexible budget, budget variance, and more. The report also discusses whether Amana should go online or establish its own online shop, taking into account all of the company's expenditures.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
Evaluation of monthly control report which is presenting the budget of flexible, original,
variances.................................................................................................................................1
For the year 2020, prepare reports for Amana Ltd based on the data given above................3
Make some suggestions for Amana's CEO on how to enhance the company........................4
PART B............................................................................................................................................5
Estimate after determining if Amana should accept to go online or establish its own online
shop, taking into account all of the company's expenditures.................................................5
REFERENCES ...............................................................................................................................9

INTRODUCTION
The following report considers the efficiency of the Mr.Amana company in the financial
year 2020, and in case of any misconceptions in the task of entity and any difficulty in
performance, produces guidance of the CEO of organisation in order to strengthen the working
of departments (Amran, 2020). However, this assists in the recognition of the entity's various
problems and then the organisation designs a strategy plan in order to resolve this firm's
disruption. It mainly focuses on the expansion of the business and overall growth of business. In
the second task of the following report, evaluates the steps taken by Mr.Amana to make better
the efficiency of the firm, as well as the manner in which Mr.Amana establishes the business on
the website of the company and sell the products on Amazon, both theses factors leads to cost
creation for the company. The report, on the contrary, engulfs the manner of a budget. It includes
analysis of budget and also considers the sum of costs and incomes which are occurred over a
particular period of time. It is specifically elaborates the spending and savings of a person over a
specific duration of time.
PART A
Evaluation of monthly control report which is presenting the budget of flexible, original,
variances.
The study discusses budget planning in terms of creativity, flexibility, and deviations. First
and foremost, it's critical to comprehend the monthly control budget. In general, the budget
expresses information based on data from the company's payroll operations, whereas overhead
expenses represent changes in spending and their utility. The company's most significant
component is to assist the owner or leader in analysing the sample of investments made by the
entrepreneur. The corporation may find it challenging to comprehend its disclosure. This report
also enables the organization's high department to construct the department's operating cost
maintenance and begin to understand the techniques for lowering business costs and
expenditures (Baret, Songini and Pistoni, 2022).
Original Budget: This budget are the typical budget that prepared before the specific period of
time. In this budgets values are determined cannot be altered or modified the actual budget is
then compared with the predetermined standard that were originally established. This rigid kind
of budget which cannot be altered by the changed according to the actual activity.
1

Flexed budget: The budget also addresses the company's set of performance or stages. In other
words, the budget discusses the pricing structure that does not alter. When a flexible budget is
created, it is a back-to-back adjustment with firm fluctuations in expenditure, and the benefit of
this flexing budget is that it helps to reduce money destruction (Cho, Kim, Rodrigue and
Schneider, 2020). High opportunities and quick performance, on the other hand, to transform the
market and company environment.
Data originality: This budgeting idea aids in the understanding of previous expenditure and
income data. The budget is made with expenditures in mind, and it also aids in determining the
firm's new income.
Budget Variance: The variance helps the organisation to analyse the data which is already used
by the enterprise to examine the estimated, standard and potential figures. If the variances result
comes in favourable conditions that means business is in profit but if the variance is adverse,
then it gives the wrong impact on the business concern that have raised in standard and real data.
It is an accounting term that reports where real cost is either increase or decrease than the
projected cost. It is calculated by subtracting the potential amount expend from the estimated
amount for every and each line items (Farazdaghi and et.al., 2020). It is continue caused by the
wrong or bad estimation or forecast the improper budget so the line is against that real results are
evaluated is not intellect. Many budget variances can be destructed through the basic
accumulation of line of the budgets.
AMANA LTD
Monthly Control Report
Particulars
Original
Budget
Flexible
Budget Variances Variance
(%)
Revenue 2500000 1600000 -900000 -36.00%
Less: Cost of Goods Sold 800000 840000 40000 5.00%
Raw Material 250000 280000 30000 12.00%
Direct labor 400000 440000 40000 10.00%
Overheads 150000 120000 -30000 -20.00%
Gross Profit 1700000 760000 -940000 -55.29%
Less: Non- operating / Fixed 350000 305000 -45000 -12.86%
2

Expenses
Warehouse rental 200000 170000 -30000 -15.00%
Insurance 100000 100000 0 0.00%
Full time Warehouse
Supervisor salary
50000 35000 -15000 -30.00%
Net Profit 1350000 455000 -895000 -66.30%
Working Notes:
Revenue-
Original Budget: 100000 * 25=2500000
Actual Budget: 80000 * 20= 1600000
Labour: 100000 * 4= 400000
Overhead:100000 * 1.50= 150000
For the year 2020, prepare reports for Amana Ltd based on the data given above.
The efficiency of Amana Ltd in the accounting year 2020 is clearly stated in the
preceding report. The above table's computation Elaborate the role and importance of the
accounting making decisions within the corporation on depicts the productivity of Amana Ltd's
expected activities, as well as how it responds to changes in the flexible budget, how it
formulates the costs and revenues of original data, and how it assists the firm in determining
business elaborate the role and importance of the accounting making decisions within the
corporation performance (Liu, 2021). Basically, there are a few different procedures that aid in
determining the work of a firm budgetary report's consequent duty:
 Determine the high pay-out cost: If a company wants to improve the way it does tasks,
it should examine the areas where the company spends a lot of money and try to recover
the tasks that cost a lot of money and lower the company's revenue. This problem may be
remedied by paying less for unneeded tasks and focusing on generating more profit for
the company.
 Lead the expenditures: It is the main part of the financial budget to control the extra
cost. These factors assist the management for the purpose of figure out the various
different expenses that have possibilities to incur in future of the organization. These
corporate statements are prepared yearly but the manufacture spent idea has been made
on the basis of month (Najaf, Atayah and Devi, 2021). The budget variance analysis
aids the managers to taking the decisions regarding save the costs.
3

 Benchmarking: This the tool used by business concern to measure the efficiency of the
activity performed. In this steps basically the standards are set to the activity and then
these standards are helpful in understanding the efficiency.
 Evaluate the area of excess expenses: Due to planning and examine of the budget
reports, the space that has dealt with highly cost of expenses can be seen upon and all the
important decisions can be taken (Patten and Shin, 2019).
The table represents the various types of aspects in which Mr.Amana. has to improve its
performance. It specifically states the concerned forecasting the original budget for the financial
year 2020, still the actual budget was lower as comparer to the original budget in number of
categories, which includes:
 Initially the income of the organisation and its primary budget are represented in the
above table it can show that the entity's revenue exceeds its actual budget. Generally, it
represents that the concern expects a huge revenue in the fiscal year 2020 but it has
received less as compare to its expectation, pointing that the organisation has to upgrade
its sales instead of paying out large amount of cost.
 Secondly, the following table shows that the firm has made a large investment in costs, as
a result of which the company's gross profit has decreased in comparison to the original
budget.
 In the third case, it means that sales and gross profit are lower than expected, and as a
result, the net profit for the accounting year 2020 is lower as well. In 2020, the company
will spend more money on operating expenses and will be less focused on profit,
resulting in low Elaborate the role and importance of the accounting making decisions
within the corporation productivity and a reduction in the company's capacity to
undertake activities with the achievement of goals and objectives (Pattnaik, Kumar and
Burton, 2021).
Make some suggestions for Amana's CEO on how to enhance the company.
The company's department has to generate more income since any company may make a
lot of money if it sells a lot of things and spends less money on activities. There is just one
element that affects the company's actual budget: poor sales. When sales are low and costs are
high, the company's net profit is reduced.
4

Preparation of budgets- A period need to be determined for which the company should make
estimation about the operational activities. And the standards should be made that accurate and
relevant making estimation that are irrelevant might disturb the working. Desirable profit for the
specific periods should be the base according to which the level must be set (Remenarić,
Kenfelja and Mijoč, 2018).
Updating of technology – Amana Ltd should introduce good technology that increases the
efficiency of the operations. This way cost can be reduced and optimum utilization with faster
delivery of work can be achieved. This is very beneficial step that the organisation must take.
Checking the performance- The mangers must check whether the employees is working
efficiently or not is there required working conditions are provided to the employee. According
to this they should motivated or provided training.
Risk management- Amana Ltd. Mangers must plan their policies strategically so that miss is
mitigated. Estimated future certain and uncertain event is one method of avoiding risk. This
should also be adopted by the company 's mangers.
PART B
Estimate after determining if Amana should accept to go online or establish its own online shop,
taking into account all of the company's expenditures.
Mr. Amana feels that all his competitors are now e-selling their product to the customer
and he has to shut down its branches at Brighton, Birmingham city centre and Manchester. In
order to make its 50% online all these location branch are to be shut down. Closing these
branches will result in decrease in revenue and effect overall turnover of the company. However
in the era internet of things (IOT) there is real need of shifting business online (Sedevich-Fons,
2019). The second option of selling through Amazon is also considerable option, since it has its
own benefits. Discussing both the options thoroughly:
Accepting the prospects of the cities are closed and transferring online will automatically
decrease sales revenue and lead to only 50 percent of the turnover with the help of online website
because this organisation is borne to inclined some of the expenses that are fixed, improvement,
delivering expenses, and others but it provides a guarantee of selling 10,000 units annually. This
will result in a total cost like as:
Expenses for improving and maintaining the internet website = £ 50000.00
5

A full-time IT programmer earns GBP 35,000.00 per year.
Expenses for the delivery system are £ 150000.00.
Total costs: £ 235000.00 (50000.00 + 35000.00 + 150000.00).
The second element is to make a decision on whether or not to sell the items straight to
Amazon. It will guarantee the selling of 65000 units each year (Silva, Bertuzi and Vunge,
2019). It demonstrates that the costs of converting the firm to an online platform are £ 1,85,000,
with Amazon fulfilment fees of £ 50,000.
Amazon is a large international online gateway platform that offers a variety of goods and
services to customers as well as assisting sellers in selling their products. It also offers customers
an online payment service from one person to another.
Now, based on the aforementioned case study, it can be seen that there is a difference
between starting an online business and selling things on Amazon.
Point of Difference Selling on Amazon Establishing own business
site
Reach The company has the largest
client base, which enhances
sales opportunities. Basically,
Amazon has established a
stronger reputation in the
industry, and as a result, a
greater number of customers
are ordering their products
through the Amazon website.
They have a significant
number of users in each of
the countries (Rouwelaar,
Schaepkens and Widener,
2021).
The time it takes to reach the
customer is rather long. In
plain terms, maintaining one's
own website takes a long time
to meet consumer demands
and an even longer period to
establish client confidence in
the website. Amazon and
other more online websites
take longer to build a positive
reputation in the industry. So,
if a company also creates its
own website, it will take a lot
longer to build goodwill.
Management cost It will take care of the
website's upkeep for the
vendors. Basically, if a seller
Everything is under the
supervision of the company's
owner. There is no charge
6

sells a product on an internet
website, such as Amazon, the
retailer will be charged for
the retailer's maintenance
costs.
related to management
because everything is under
the owner's control.
Control The vendor has no influence
on the page or the pricing of
the items.
The company's owner has
total control over page
decoration, product removal,
and sign-in (Williams and
Lawrence, 2018).
Expenditure For a retailer to open an
Amazon seller account, they
simply needed £50,000.
The decision to sell after
establishing an online store
will be costly to the website's
owner. It will cost £1,85,000
in total.
Firm data It is a well-established firm
that already has a collection
of data that is used to assess
the buyer's nature.
Data recovery from a new
company will take time. The
public will take longer to visit
the company's online website
due to the volume of traffic.
The following stages are expressed and discussed in the table above:
 The costs of expanding one's own website will be higher in comparison to a corporation
that is already established and has a public board of directors.
 If a firm sells its products on its own website, the data of the company is protected; but, if
a company sells its products on another website, such as Amazon, there is no assurance of
data security, and there is a significant danger of data insecurity.
 If a firm sells its products on Amazon, it has already begun to improve the facilities and
services it offers to customers. However, if a company sells its products on its own
website, it has the option of deciding how best to provide better service and facilities to
its customers; otherwise, the company's own website will lose its stability in a
competitive market, making it difficult for the business to remain stable in the long run.
7

As a result of the foregoing case study, it can be concluded that Mr. Amana should create his
own website, and that building a page will instantly produce profit for Mr. Amana. Producing in
greater quantities lowers the per-unit cost and boosts the company's profitability (Williams,
2021).
CONCLUSION
From the above report it can be said the budgets are prepared to increase the productivity
of the organisation. Amana Ltd budgets shows that in specified period of time it was unable to
achieve the standards. Its actual performs was not good the company need to work on it. The
company is incurring high expenditure and less sales. It has not made its process efficient enough
so it need to redesign its way of operating. Filing to ignoring to the operational activities might
cause loss to the company in the near future. The decision of selling the good through personal
website is more feasible because it is more profitable. Though shutting down offline customer at
various part of Europe might result in loss of sales revenue initially.
8

REFERENCES
Books and Journals
Amran, A., 2020. Influence of Decentralization and Management Accounting System Managerial
Performance Against. ATESTASI: Jurnal Ilmiah Akuntansi. 3(1). pp.63-73.
Baret, P., Songini, L. and Pistoni, A. eds., 2022. Sustainability Accounting, Management Control
and Reporting: A European Perspective. Taylor & Francis.
Cho, C.H., and et.al., 2020. Towards a better understanding of sustainability accounting and
management research and teaching in North America: A look at the
community. Sustainability Accounting, Management and Policy Journal.
Farazdaghi, S., and et.al., 2020. Eeffect Of Corporate Governance On The Relationship
Betweendisclosure Of Internal Control Weakness And Accruals Quality.
Liu, Y., 2021, August. Research on the influence of artificial intelligence on the training of
accounting talents and strategy. In The Sixth International Conference on Information
Management and Technology. (pp. 1-4).
Najaf, K., Atayah, O. and Devi, S., 2021. Ten years of Journal of Accounting in Emerging
Economies: a review and bibliometric analysis. Journal of Accounting in Emerging
Economies.
Patten, D.M. and Shin, H., 2019. Sustainability accounting, management and policy journal’s
contributions to corporate social responsibility disclosure research: a review and
assessment. Sustainability Accounting, Management and Policy Journal.
Pattnaik, D., Kumar, S. and Burton, B., 2021. Thirty years of the Australian accounting review:
A bibliometric analysis. Australian Accounting Review. 31(2). pp.150-164.
Remenarić, B., Kenfelja, I. and Mijoč, I., 2018. Creative accounting-motives, techniques and
possibilities of prevention. Ekonomski vjesnik. 31(1). pp.193-199.
Sedevich-Fons, L., 2019. Accounting and quality management: the accounts payable function
under ISO 9000. Business Process Management Journal.
Silva, P., Bertuzi, R. and Vunge, E., 2019. LEARNING BY DOING METHODOLOGY IN
ACCOUNTING AND ADMINISTRATION DEGREE: A
LECTURERS’PERSPECTIVE. In INTED2019 Proceedings. (pp. 4659-4665). IATED.
Rouwelaar, H., Schaepkens, F. and Widener, S.K., 2021. Skills, Influence, and Effectiveness of
Management Accountants. Journal of management accounting research .33(2). pp.211-
235.
Williams, K.L. and Lawrence, H.J., 2018. William A. Paton: A study of his accounting thought.
Emerald Publishing Limited.
Williams, R.B., 2021. Accounting for steam and cotton: Two eighteenth century case studies.
Routledge.
9

10