Analysis of Amana's Ltd Performance and Online Business Strategy

This report provides a detailed analysis of Amana Ltd's financial performance, focusing on the year 2020. It examines the company's monthly control report, highlighting budget variances in areas such as sales, raw materials, labor, and overheads. The report compares the original budget with actual figures, revealing a decline in performance due to factors like decreased sales and increased costs. Recommendations for improvement include managing variable costs, identifying infrastructure for budgeting, planning for changing conditions, and analyzing effective performance metrics. The report also explores the decision to go online, suggesting the benefits of setting up their own online business or selling through Amazon to increase sales and customer reach, especially in the context of the tourism industry and the impact of the COVID-19 pandemic. The report emphasizes the importance of adapting to market trends and personalizing customer communication for effective business operations.

Management
accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
PART A...........................................................................................................................................3
1. Monthly control report of Amana's Ltd:.................................................................................3
2. Amana's Performance report during the year 2020.................................................................5
3. Recommendations for Improvement: .....................................................................................5
PART B............................................................................................................................................7
1. Analysis of decision to go online............................................................................................7
2. Suggestion to set up their own online business or sell on Amazon:.......................................8
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management Accounting indicates the systematic process of identifying, measuring,
analysing and interpretation of financial information and data. It is an effective management
accounting tool which helps the management to take effective and efficient decision.
Management accounting provides useful insight to all the operation and function of business.
Basically it assists management to do effective planning and controlling in an organisation.
Management accounting is concerned with the future. It help business to collect, analyse data to
plan for business future growth. It studies the relation between the cause and effects. It provide
vital source of data for the effective management planning at the same time it is an important
medium of communication which resolve various threats between the employees. Main aim of
this report is to analyse Amana Ltd business budget, financial performance during the year 2020
(Spanò and Maffei 2020). This report includes Amana Ltd monthly control report which
represent variance. Another, Amana's financial performance about its original budget and actual
figures. Along with this recommendation for enhancing performance to Amana's CEO. Lastly
report includes design regarding whether business should go online or they should start their own
website or sell through amazon platform.
TASK
PART A
1. Monthly control report of Amana's Ltd:
Budget refers to an statements which represents the estimation of business expenditure
and revenue for a given period of time. With the help of budget management can effectively
analyse all the operation and function of businesses. Budget can be analyse by comparing final
outcome of the business if the actual result amount profit is more than the estimated one than it
clearly rectified that business perform well through out the year. On the other side if profit is less
then the estimated one than it is clearly visible that organisation is lacking at somewhere in there
operations. For better performance organisation should analyse what are the reason behind the
less profit and take corrective actions. Budget Variance indicated the difference between actual
result and estimated budget. Budget can be both positive or negative in nature (Helgesen 2021).
Variance in budget may be arises due to some internal factors such as economical, political or
can be due to some mistake done by any employee of business. Negative budget variance

indicates the drop in the operations of business. This happen due to any reason such as higher
cost incurred than expected one or can be due to less revenue. There are basically two types of
budget variance Positive and negative variance(Asuquo, Dan,and Effiong 2020).
 Positive Variance: There are various organisation that sets a well-padded budget for
each single projects or activities. They try to accurate as possible to allow expenses, to
build extra funds for the safety against the costs such as changes in market, Unexpected
and sudden cost connected with suppliers.
 Negative Variance: Adverse budget variances mainly occur through the wrong
estimation or analyses of future spendings. They occur when companies do not
affectively analyse their costs or unexpected expenses. Another reason company may
face adverse variance if it allows some kind of politics to command target spending
which is excessively low.
Original budget £ Actual Budget £ Variance £
Units 100000 80000 20000
Selling Price 25 20 5
Total Sales 25000 16,00,000 900000
Variable costs:
Raw material 250000 280000 30000
Labour 400000 440000 40000
Overheads 150000 120000 30000
Contribution 17,00,000 760000 94000
Fixed Overheads:
Warehouse 200000 170000 30000
Insurance 100000 100000 -
Full time warehouse
supervisor salary
50000 35000 15000

Profit 1350000 455000 895000
Contribution = Total sales-variable cost
Profit = contribution-Fixed cost
2. Amana's Performance report during the year 2020
From the above case it is concludes that the performance of Amana's Ltd during the year 2020
has been declined (Drobyazko and Khodjimukhamedova 2019). This happens because in year
2020 estimated of sale of Amana's Ltd. Was £100,000 but the actual sale were only £80,000
units which indicates that there is short fall of £20,000 units. Along with this product price is
also declines from £25 to £20 units due to this company sale has been reduces by £900,000
which is considered as a high amount for the company. Both the material cost and variable cost
has been increases by £30,000 over the original expected budget, as well as labour cost also have
been increases by £40,000 over the original budget. Both these cost where adversely effects the
performance of Amana Ltd, while indirect cost also reduces by £30,000 from the original budget,
and that positively affects the business operations. By £9,40,000 seems decreases in sales and
variable costs of Amana's contribution. Fixed cost involves the warehouse rental cost which
decreases by its original budget, which contributes to saving of £30,000, at the same times,
insurance cost of original budget, indicates zero impact on the performance of Amana's and full-
time warehouse supervisor's salary of £15,000 was also also reduces, which positively impact the
performance of company. After that an effective analysis of each sales reflects that revenue of
Amana's reduces by £95,000. After analysing above case, there are some particular path which
are required to enhance and improve for the performance of business. Firstly company should
hire some amount of money for their total expenditure as they can know how much it is likely to
cost. Organisation just require to keep their records and budgets simple and accurate, which
helps the members of workplace, and management to easily track income and expenditure that
must have to be accounted. For maintaining primary budget for a specific accounting period,

management involves all employees, which state that all the company's department have to
except their request.
3. Recommendations for Improvement:
There are different ways that help Amana's operations and performance, along with this
Improvement in their budgeting help them to decrease their unnecessary and unexpected cost
(Pathiranage and Abeysekera 2020).
 Manage Variable Cost: If Amana efficiently manage their past variable expenses and
according to them analyse or compute them at what present age of sale they represent. If
they use historic percentage it provides business an effective indicator of potential future
cost and a standard to use in keeping those costs in line with selling activities (Moll and
Yigitbasioglu 2019).
 Identify Infrastructure that helps their budgeting process: If Amana identify and
understand infrastructure that helps in process such as technology, employees, and other
factors which help to run their operations effectively and efficiently and make sure that
each step require for execution are adhered to across the board.
 Plan for Changing Conditions: In company's, business the only constant thing is
change, so company has to plan accordingly. Amana Ltd can improve their operations by
making their planning and budgeting process in line because planning maintain an
analyses of on-going trends, and implement efficient practices that c0ontributes in overall
financial health as a budgeting process improvement.
 Analyse effective performance metrics for budget: If Amana Ltd make efficient and
effective KPI(key performance indicators) that help company to make right budgeting,
with the related procedure to analyse the financial condition of company that includes the
revenue growth and earning growth.
Amana can improve their business operations to enhance their performance, there are
various ways that help Amana to improve their performance. Amana Ltd. Have to improve their
sales units, and this can possible if they improve their sales units which can increase their selling.
For increasing sales in the business Amana can start their business on online platform, which
help them to serve their product more customers and also can raise their popularity in the market.
They can also extent their business to B2B network. It is highly recommended to the business
that they are not need to low their prices as they have to focus on original budget price that is

£25. If Amana want to attract more and more customer by not decreasing their prices, then they
have to than they require to attract existing customers, by offering them special offers, packages,
For more sales encourage them to leave a feedback, for referrals (Druzhynina and Kushal,2020) .
If they want to improve their selling then they have to cut down their variable cost in order to
raise profit. In order to equalize original budget with material then they should substitute lower
cost material were possible, need to reduce unnecessary product features, and should reduce
waste. Business ned to identify more suppliers so, that they can easily negotiate for price.
Labour prices have to be cut down is likely they have to give efficient training to their potential
employees, Company should start lean production which reduces ineffective and non-value
added process with manufacturing, require to implement process such as standardization that
results in economy of sale and enhance whole process of production (Modell 2022). If price of
labour equals with the original budget figure then it will adversely effect profit of business. On
the other hand if the manager of Amana Ltd focus on their prices which they have set in their
estimated budget they are able to earn high amount of profit. If Amana's Ltd top level
management focuses on various functions of business in a regular basis so, they can easily
analyse and evaluate each and every individual and take effective actions on those how are not
perform their duties properly. There are various methods which helps the Amana Ltd to raise
their revenue by adopting various technologies related to market trends to attract the various
opportunities, company also need to modify through online mode connect with their potential
customers for effective communication. In tourism industry Amana operates their business from
last 40 years therefore still CEO require to again focus and analyse critical areas such as various
businesses in UK, US now they want to sell their Souvenir on online platform which arise many
competitors in the market. Rather then that they have to focus on starting their own website or
enhance their current website to attract more customers. In the Covid-19 pandemic tourism
industry badly affects coming out for this they need to focus on setting up effective strategies and
plans. Some business want their clients to make Easter song and send them in the video. Amana
Ltd. Have to invest carefully in promotional campaigns or have to provide free shipping for their
online customer. If Amana carefully work on building their email list and modernize its CRM list
they need to somite their prospect list of customer and personalize the messaging to turn them
into leads such as niche market, lost opportunities. If Amana efficiently summarize its budget
then discussed with every one in company leads to get a flexible budget, set efficient objectives

for business operations. The most effective way to set or maintain budget is to make efficient
alignment of goals across the company (Dumay and de Villiers 2019).
PART B
1. Analysis of decision to go online
Operating business now on online platform is more efficient and effective. As in today's time
customer not have enough time to go and purchase goods from market. That's why it became
essential for business to sell their goods online through which they can save time of their
customer's. It became important for Amana Ltd to operate their business online if they do not
then they have to sell their souvenirs through the various centres which can adversely affect their
sales. This happens because customer find out many choices online and can compare the prices
which state that they should purchase product online rather than offline. If Amana want to
implement their business operations smoothly then they have to shift their business on online
mode. This is an positive sign of business to perform business online and this will help them to
increase their sales as well image in the mind of tourists. This will require low setup cost.
Conducting business online, Amana's employees can work online from anywhere and at any
time. This will help them to reduce operational cost so, that they target every sector of market.
By starting their own websites with an effective quality and aesthetic design they can easily
compete with other market leaders (Javed 2019).
2. Suggestion to set up their own online business or sell on Amazon:
It state that Amana can set up their own online business or can sell its goods on amazon
platform. If Amana want to sell their goods through online platform then they select best option
If Amana start their own website then they incurred the following costs by guaranteed sale of
£100,000 units annually.
Cost of setting up delivery network £150,000
Cost of upgrading current website to handle large volume of sales £ 50,000
Salary of a full-time IT programmer £ 35,000 per annum
Total = £ 235,000
From the above calculation Total cost incurred during the year with the sale of £100,000 units
and given per unit cost is £2.35. Business can sell their goods directly on the amazon platform as

a source of alternative, which incurred less cost with the guaranteed sale of £65,000 units
(Jędrzejka 2019).
Amazon fulfilment fees is £50,000 From the above mentioned case it clearly seen that there is
lack of control over on prices by Amazon, which means Amazon have to set their own labels
which carries the Logo of Amazon brand that it placed an order with suppliers, pay the amount
of item and set price of products with the increase in revenue on the website related to the
market. Amana business can suffers from high loss because they offer product at low prices, On
the other hand on Amazon they provide a return policy for deficient product (Sangster Stoner
and Flood 2020).
If Amana sell their pro0duct in their own website total cost incurred is £2,35,000 which provides
£100,000 of guaranteed sale per year, which allow them to £2.35 for every sale. Business have
the opportunity to conduct their business operations in an efficient and sustainable way for long-
term period of time because Amana owner have full control over the pricing policy, with this
policy they can also sold souvenirs same product at different price. With different offers and
discounts. Amana can sell their product from anywhere at anytime which help them to achieve
more profit.
It is clear from the above discussion that if Amana sell their products through their own website
they get more benefits and earn high profit as compared to selling through Amazon.

CONCLUSION
It is concluded from the above report that management accounting plays vital role in businesses.
With the help of management accounting Amana can effectively manage their business
operations. From the above report the concept of management accounting are clearly evaluate. In
part A analysis from actual budget to original budget set. Secondly budget made on performance
of Amana during the year 2020. Furthermore report involves recommendations to CEO of
Amana Ltd to improve various areas in which they are lacking. On the other side in part B report
includes analysis of decision in regards to Amana that Amana should sell their product on their
own website or through Amazon. After analysing it recommended to Amana that they should sell
their product on their own website because they can earn more profit as compared to sell product
on amazon, because they have full control overall the operations and activities of business, from
anywhere at any time they can sell product to their potential customers, as customer's now also
shift towards online mode that will help Amana to increase their brand value in the market.

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