Amana Ltd: Evaluating Accounting Control, Efficiency & Online Store

This report analyzes Amana Ltd.'s accounting performance for 2020, focusing on the monthly control report, which includes the original budget, flexed budget, and variances. It assesses the company's efficiency, identifies areas for improvement, and provides suggestions to the CEO for enhancing revenue and controlling costs. The report also evaluates the feasibility of Amana Co. setting up its own online store versus utilizing an existing platform like Amazon, considering the potential impact on sales, expenses, and customer reach, ultimately providing a comparative analysis of the benefits and drawbacks of each approach. Desklib offers a range of solved assignments and past papers for students.

ACCOUNTING

Contents
PART A................................................................................................................................................3
Represent a monthly control report that shows the original budget, flexed budget, and variances....3
Assess the control report and analyze efficiency of the Amana Ltd. For the accounting year 2020. .4
Provide some suggestions to Amana’s CEO for improving the areas................................................5
PART B................................................................................................................................................6
Elaboration on the assessment on whether Amana Co. shall go for setting its own online store or
should made an acceptance to go online............................................................................................6
CONCLUSION....................................................................................................................................9
References..........................................................................................................................................10

Introduction
The following report looks into the capability of Amana ltd. for the accounting period
of 2020 and also finding out the misconceptions that it has performed in its activities. In
addition to this, it also highlights the variances that have taken place in the original data and
the flexible budget report with the proper recommendations and suggestions (Kudlák, Urban.,
2020).Along with this, the report has also stated the concerned areas that needs improvement.
Basically, it can be said that this report talks on the variances and methods to control such
deviations by providing the valuable insights for each item. Additionally, It also throws light
on how the gross profit of a firm affects the net profit. Furthermore, it tells the benefits and
drawbacks associated with setting up the own online business and selling the product via
existing online platforms.
PART A
Represent a monthly control report that shows the original budget, flexed budget, and
variances.
The monthly control report shows the company’s operational and financial
performance on monthly basis. These reports help the company in the assessment of the cost,
activities and production. It is a brief as well as the comprehensive approach, that lists the
major activities and the objectives for the next month. This can help in the progress and
smooth functioning of a business enterprise.
 Original Budget: It is approved at the starting level for the budget period. The budget
of this kind contains the adjustments for all the types reserves, carry- forward
amounts, allocations, transfers, and other authority changes applicable to the budget
period.
Flexed budget: It is budget that changes or adjust with the variation in the volume or activity.
This is considered to be the most useful kind when compared to the static budget (Lau, Scully
and Lee., 2018). With the changes in the cost and activity, the flexible budget will adjust
because it involves the variable rate per unit of an activity instead of the fixed amount. It is
the most effective mechanism to measure manager’s efficiency.
 Variance budget: This budget report helps an organization in determining the reasons
for the deviations. In short, this report describes the instances where the actual costs
differ to the standard costs.
Below is the monthly control report of Amana ltd. For the year 2020-
AMANA LTD
Monthly Control Report

Particulars
Original
Budget
Flexed
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
Expenses
350000 305000 -45000 -12.86%
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%
Assess the control report and analyze efficiency of the Amana Ltd. For the accounting year
2020
The above prepared report shows the efficiency of Amana ltd. For the financial year
2020. The report represents the evaluations represents the productive capacity of the
estimated tasks and activities of Amana ltd. It also portrays on how this company has
coordinated with the variances in flexed budget and how it has planned the expenses and
income to assist the company in order to determine the performance of its business enterprise.
The various step that a company can take for the purpose of bringing good results are as
follows-
Identifying the areas that involves high cost- A company shall examine those areas in which
it has to pay high cost. It shall adopt a better measure for the performance of task by
minimizing the costs. The business organization must cut off the unnecessary expenses
related to the activities that are not mandatory to perform ( Tekathen and Dechow., 2020).
Taking all these measures can guide a company in reducing its expenses and generating more
income.
 Keeping track on the financial goals- Along with controlling expenses, a budget is
really important as it helps in providing a ground on whether a company is able to
achieve its fiscal goal or not. When a company creates a budget, it sets boundaries on

the financial behavior so that the business can stay on track and achieve its desired
goals in terms of money as well.
 Control on spendings- By the preparation of a budget a firm can prioritize its
activities. These priorities help the businessman or the owners of a company to get
high profits.
The values and figures in the table reflects those important areas on which the Amana Ltd
need to work and bring improvement in the performances. The above calculated numeric
values give the clear representation of the variances. There are grounds where the company
has not attained according to its original budget i.e., the actual results obtained are lesser than
that of the original one. The various areas can be listed as following:
The very first particular that can be seen in the table is of revenue which is the major income
for any company. The report shows the difference of around 90,000. The actual sales are less
than the original budget. This is not at all the positive approach; a business firm shall adopt
for some efficient measures for increasing sales rather than paying for the expenses. (Stout.,
2018).
 Another area is the cost associated with the goods sold, this includes raw material,
direct labor, overheads. A cost linked with all these items has increased to 40000 for
the accounting period 2020, when compared with the original budget. Thus, the gross
profit ascertained is 76000 and the difference that it holds is of 94000. This reflects
that the company is not able to control its expenses and increase its sales, which can
surely lead to the negative consequences that Amana Ltd has to face.
 The last row in a table that pictures the amount of net profit for 2020 which is
4,55,000. And the variation is of 8,95,000 which is in negative. It portrays that the
company is not taking preventive measures to control its expenses. The decrease in
the net profit is seen due to the decline in the gross profit. This means that the
company is spending more on its expenditure and is not focused in the profit and
revenue generation. For controlling all these factors, a firm shall formulate the proper
planning policies and take various alternatives.
Provide some suggestions to Amana’s CEO for improving the areas
 For the first area which is of revenue the company must increase its sales by making
good sales strategies and make long term policies which are nearly connected with the
marketing. Amana ltd. Can adopt for the value- based selling techniques as this
mechanism are based on the value that a customer experience with the usage of a
specific product. This business must observe the customer’s business model very
deeply so that it can meet the requirements of the audience. It should have a close
look on the pricing strategy of its competitors.
Amana’s CEO should take the effective cost control measures in order to prevent the
unnecessary expenses. It can bring the strong relationship with suppliers by paying invoices
on time. This will help the firm to gain suppliers trust and the supplier can reduce some prices
for the raw materials. It can also keep a track of day-to-day expenses as well as fixed costs
(Gong and Subramania., 2020)
 . It shall make a good plan for the budget to achieve the desired goals.

 Amana Ltd. must keep itself ready to meet the future uncertainties so that the firm
could have alternative sources to overcome the issue whether related to the fiscal
issues or the operational issues.
 Amana ltd. shall have a close look and try to lesser the operational costs related to the
activities that are performed on the daily basis in a business enterprise. Because, as
the case depicts it is very clear that the gross profit had an adverse effect on the net
profit also. This is concluded because the company has incurred less operational
expenses when looked at the original data.
PART B
Elaboration on the assessment on whether Amana Co. shall go for setting its own
online store or should made an acceptance to go online.
The provided case in reflects that Amana Ltd. is operating very smoothly and
effectively in the United Kingdom based countries, Europe and United states. But, on the
other side, Amana Ltd. want to sell its products and services through an online mode as well
for increasing its sales revenue. All this is possible by shutting down the branches that are
located in Birmingham, Manchester and Brighton. But it will be tough to do so. The two
available options that Amana Ltd can go for is transferring the entire functioning of its
business in an online manner and the other is by selling the goods and commodities through
an existing online store Amazon.
 Supposing that all the branches of the cities have been closed and the business
is shifted online, then it would definitely result in the decline of sales by 50
percent of the turnover. This will take place due to some of the fixed expenses
that a business has to pay like delivery expenses etc. But if this condition gives
a surety on selling 10000 units on a yearly basis. Then the total expenses
would look like below mentioned-
Expenses related to improving the online website = £ 50000.00
Payment as salary for a full- time IT programmer = £ 35,000.00 yearly
Expenses incurred in delivery = £ 150000.00
Total costs = 50000.00 + 35000.00 + 150000.00 = £ 235000.00
 The second option that is available to Amana ltd. Is of selling the goods and
commodities in the well – known online website Amazon. This gives a
guarantee selling 65000 units on the annual basis. The fess that the business
enterprise would have to pay for shifting its business online is £ 185000 & the
accomplishment money that it has to pay to amazon is £ 50000. Amazon is a
well - recognized international platform that sells its products across the globe
along with the online payment services to its audiences.
From the above discussion, a difference can be stated between going online and
selling products through the online mode.
Basis Selling through amazon Setting up the own online

store
Customer’s Reach Amana ltd. Can get good
reach to its audiences if it
sells its product through
Amazon. Because it sells
its product across the
globe and is a good
platform. In fact, it will
be very easy by this mode
to gain customer’s trust
because amazon is the
best online shopping
platform and is widely
preferred by the people.
It might be really tough
for Amana ltd. To make a
good reach to the
customers as it will have
new presence in such
platform. Audience would
not be able to make trust
on the newly stablishes
website because of the
frauds that have taken
place in case of the online
platforms. (Wang and Ni.,
2020)
Maintenance cost This option might not be
considered appropriate as
amazon can charge more
from the retailers for the
product recognition.
This is suitable in this
case as the website control
will be in the hand of the
Amana ltd. So, it will not
have to pay any
maintenance charge to sell
the product.
Control In this, the control will be
totally in the hands of
amazon’s owner so, the
price of the goods and
services can be controlled
by them. (Matsuo and
et.al., 2021)
Control will be in the
hands of Amana ltd. So,
the prices of the
commodities cannot be
influenced by another
website.
Expenses Expenditure incurred is
just 50000 in this.
This has high
establishment cost as
compared with that of
selling products through
amazon.
Data As it is easy to reach the
customer because amazon
has the existing data of its
clients. (Yuan. and
et.al.,2018).
In this scenario, it will be
a tough deal for Amana
ltd. to collect the data
because it has newly
shifted for an online
mode.
From the above table representation on the basis of differences between the two the
followings points can be considered.
 The choice of setting up its own online store is involving huge costs as
compared to that of other option available to Amana Ltd.
 But on the same time, selling goods by Amazon can even lead to the data
breach because there are many third party involved for delivering the products.
Because in the company’s own website there is data security that remains with
the company’s owner.

 Another thing that is clear is of maintenance cost and price influencing. When
these two terms are considered and discussed then Amana ltd. might have to
face the negative consequence that is of loss
Therefore, from the above statements it can be found out that switching its store to the
online platform is an appropriate option. Because looking on the biggest factor that is
of data; which holds the sensitive details of customers and product. If this data gets
leaked then it will be very complicated for any organization to collect it again.
Customers are the foundation stone for any company and if the data breaches, then it
would obviously result in the loss of customer’s trust and so the profitability
indirectly. Considering another factor of expenses that it will have to pay for
maintenance purpose is of 50000, so it will be better for the Amana ltd. to establish its
own online platform to avoid paying such expenses on regular basis.

CONCLUSION
So, it can be concluded from the above report that the company shall make less
expenses to meet its desired profit goal. As the expenses of any firm can affect the gross
profit and net profit of a company in both positive and negative manner. And it is also clear
that how these areas affect the efficiency and effectiveness of a firm. Moreover, this report
has also given the clear understanding on the profit for the financial year 2020 and the best
possible method that a firm should go for to bring a decline in its expenses and earn a huge
profit ratio.

References
Books and journals
Booth, P., 2018. Management control in a voluntary organization: accounting and accountants in
organizational context. Routledge.
Bryer, A.R., 2018. Assembling a practice of social belonging: the politics of budgeting in an
alternative organization. Accounting, Auditing & Accountability Journal.
Gong, M.Z. and Subramaniam, N., 2020. Principal leadership style and school performance:
mediating roles of risk management culture and management control systems use in
Australian schools. Accounting & Finance. 60(3). pp.2427-2466.
Heinicke, X. and Guenther, T.W., 2020. The role of management controls in the higher education
sector: an investigation of different perceptions. European Accounting Review
29(3). pp.581-630.
Herath, H.S. and Lu, X., 2018. Inference of economic truth from financial statements for detecting
earnings management: inventory costing methods from an information economics
perspective. Managerial and Decision Economics. 39(4). pp.389-402.
Hien, N.A. and et.al.,2019. The determinants affecting the accounting service quality: a case of
accounting service enterprises in vietnam. Academy of Accounting and Financial
Studies Journal. 23(2). pp.1-11.
Kerosi, E.V.A.N.S., 2018. Analysis of budgetary control practices and the management of micro
and small enterprises at Kangemi Town in Kenya. International Journal of Scientific
and Research Publications. 8(1). pp.99-112.
Kudlák, A., Urban, R. and Hošková-Mayerová, Š., 2020. Determination of the financial minimum
in a municipal budget to deal with crisis situations. Soft Computing. (12). pp.8607-
8616.
Lau, C.M., Scully, G. and Lee, A., 2018. The effects of organizational politics on employee
motivations to participate in target setting and employee budgetary
participation. Journal of Business Research. 90. pp.247-259.
Liu B. and et.al.,2019. Greenhouse gas emissions and net carbon sequestration of the Beijing-
Tianjin sand source control project in China. Journal of Cleaner
Production. 225.pp.163-172.
Matsuo, M. and et.al., 2021. The influence of an interactive use of management control on
individual performance: Mediating roles of psychological empowerment and
proactive behavior. Journal of Accounting & Organizational Change.
Stout, D.E., 2018. Further things I have learned… Selected reflections about publishing in
accounting education. Issues in Accounting Education. 33(3). pp.67-84.
Tekathen, M. and Dechow, N., 2020. Semantic narrowing in risk talk: The prevalence of
communicative path dependency. Management Accounting Research. 48. p.100692.

Wang, Q. and Niu, M., 2020. Exploring the relationship between government budget information
and citizens’ perceptions of public service performance in China. Public
Management Review. 22(3). pp.317-340.
Yuan, S. and et.al.,2018. Evaluation of the energy budget and energy use efficiency in wheat
production under various crop management practices in China. Energy, 160. pp.184-191.