Management Accounting Report: Amana Ltd Financial Performance

This report provides a comprehensive analysis of Amana Ltd's financial performance, focusing on a monthly control report that compares budgeted and actual figures, revealing variances in selling price, variable costs (material, labor, overhead), and fixed overheads. It highlights the impact of the Covid-19 pandemic on the company's revenue, costs, and profitability, suggesting improvements such as strategic planning, cost reduction, and effective resource utilization. The report also addresses the strategic decision of whether Amana Ltd should develop its own website or utilize Amazon's platform for online sales, considering the costs and benefits of each approach to enhance their business operations.

Management
Accounting Assessment
2 Report

Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................2
PART A..................................................................................................................................2
1. Monthly control report preparation based on budget, actual, and deviation arrived:.........2
2.Performance statement of Amana Ltd during the financial year 2020:...............................4
3. The improvement points suggested to the Chief Executive Officer of Amana Ltd:..........5
PART B..................................................................................................................................6
The suggestion that has been given to Amana ltd that whether they should develop their
website for selling their products and services or use the amazon facility:...........................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The budget is an estimate of expenditure that an organization has made based on experience
regarding the expenses and income they have made by the entity. The budget intends to compare
the actual performance of the business during the current operational year. With the help of such
analysis, the difference in the performance has been identified therein and such differences need
to be analysed and resolved by the corporation. Any deviation in the performance has been
identified with such comparative analysis that would help the organization to improve in those
areas of the business which need to be improved (Bulgakova, Bobryshev, and Dudaev, 2018).
MAIN BODY
PART A
1. Monthly control report preparation based on budget, actual, and deviation arrived:
 Control reports every month:
These are the reports that have been prepared based on the performance of the business
that has been prepared by the management of the organization and these reports are
linked to various departments of the organization such as payroll, utilities, sales,
purchase, etc. The benefit of this report is that it helps the business in the examination of
expenses that have been carried out by the department by carrying out the comparative
analysis relating to the cost and also ensures that any deviation that has been arrived so
far in all the business processes must be addressed accordingly (Cokins and Căpușneanu,
2020).
 Flexible budget:
These budgets are being prepared to check the performance of the organization on a
different level of output of the organization. These budgets are used as the benchmark of
the business to check on what level of output they are gaining maximum revenue and
profit. Similarly, the different levels will provide the business an idea that at what level of
production they cost they are incurring in terms of fixed and variable are being low.
These budgets are being prepared on an estimation basis and there are chances that the
results so obtained from them may get diverted.
 Original budget:

These budgets are being prepared considering the future performance of the business and
based on existing funds, the business is retaining. These budgets play an important role in
the finance department of the organization as they provide a road map for the expenses
and income the organization is expanding or earning. The main focus of these budgets is
to maintain certain limits on the expenses that must be maintained by the organization
throughout the year (De Araújo Wanderley, 2019).
 Budget variance:
It simply shows the performance of the business when the actual performance is being
compared to actual figures. These variances help the organization to check whether any
deviation has been taken place due to what reason and suggestion has been taken into
consideration to improve such variances. It is important for the business to properly
handle such variances and maximum deviations should be addressed accordingly so that
the funds of the business do not get misused throughout the year.
Below is the table prepared which is relating to the Amana Ltd that shows the
monthly control report of their business by comparing the actual figures with budgeted
and such deviation are being reflected in percentage terms: -
Particulars Budget Actual Variance Percentage
Selling price per
unit
2500000 1600000 -900000 -56.25
Less: Variable
cost
Material 250000 280000 30000 10.71
Labor 400000 440000 40000 9.09
Overhead 150000 120000 -30000 -25
Contribution 1700000 760000 -940000 -123.68

Less: Fixed
Overheads
Warehouse
Rental
200000 170000 -30000 -17.67
Insurance 100000 100000 0 -
Full-time
warehouse
Supervisor
Salary
50000 35000 -15000 -42.85
Profit 1350000 455000 -895000 -196.77
2.Performance statement of Amana Ltd during the financial year 2020:
According to the above Amana Ltd monthly report following analyses are as follows: -
Selling Price – Original Budget of the Amana Ltd company is 2500000 and the actual is 1600000
by subtracting the original from the actual they get 900000 in adverse; this means the company is
not getting much amount as they expected in the monthly budget. During December 2020
pandemic Amana Ltd.’s revenue took a big hit as the government restrict the movement and
travel from one place to another and it decrease their selling price per unit. To increase or control
sales per unit company should try to increase its marketing through online websites (ElKelish
and Rickards, 2018).
Variable Costs – Variable costs include material, Labour, and overhead. These variables cost of
Aman Ltd are as follows: -
 Material Costs – The company Amana Ltd.’s material cost variance is 30000, which
shows that the actual is higher than the original budget. The material price variance is
affected by a change in prices and the quality of the product. Due to Covid-19 Pandemic,
the price and quality of the product are different than the previous one. The company
needs to control material costs which affect the contribution and profit directly.

 Labour Costs – The variance of Labour costs of the company Amana Limited is 40000,
it comes after subtracting the original budget from the actual. The Variance provides that
the difference between the actual and original budget is higher, it indicates that the
labour cost is more expensive than the planned budget. During Covid-19 the company
Amana Ltd.’s cash inflows are decreased and their expenditure increased because the
tourism work is fully closed by the government and the company have to pay their
labour salary. To maintain or cover the labour cost decrease the excessive staff (Fuzi,
Habidin, and Ong, 2019).
 Overhead costs – The variance of the overhead cost of the company Amana Ltd is
adverse 30000. It identifies by subtracting the original budget from the actual. Overhead
cost is prepared for business future forecasting which includes a rate of the amount
required to pay for labour. It was also useful in the utilization of resources due to better
planning. Due to Covid-19 Pandemic, the company Amana Ltd is affected badly due to
this the income of the company is null. To cover the overhead company needs to forecast
the plan more effectively and efficiently (Golyagina and Valuckas, 2020).
 Contribution = Contribution is calculated by subtracting variable overhead from sales
per unit cost. Contribution Variance is the difference between original budget
contribution and actual contribution. The contribution variance of Amana Ltd company
is adverse 940000. Contribution is help to identify the total amount remaining after
variable costs to cover fixed overheads and make a profit for the company. Amana Ltd is
affected by the Covid-19 pandemic lockdown from December 2020 to February 21
between the period the cash inflow of the company is zero. To overcome the cash flows
the company needs to utilize the resource efficiently and effectively and also try to
maximize its sales per unit cost.
 Fixed overhead – Fixed overhead costs refer to the cost which never changes even after
the change in the cost of the quantity of production. Fixed overhead is most important to
run a company easily and smoothly. Fixed overhead is only affected by the profit
margins of the company. Amana Ltd.’s company fixed overhead includes warehouse
rent, Insurance, and a Full-time warehouse superior salary. During covid-19 Pandemic
the company Amana Ltd is highly affected because the cash inflows are zero but the
company needs to pay warehouse rent Insurance, Full-time warehouse superior salary.

 Profit – Profit comes after subtracting the contribution from fixed overhead. The profit
variance of the company is the difference between the original budget and the actual.
The profit variance of the Amana Ltd company is adverse 895000. Due to the Covid -19
Pandemic, the company's profit is highly affected as the actual profit of the company is
lesser than the original budget (Gomez-Conde and Lopez-Valeiras, 2018).
3. The improvement points suggested to the Chief Executive Officer of Amana Ltd:
According to the above report analysis the situation of the company Amana Ltd is not in a
good condition after the pandemic. In the pandemic period tourism is the one of the most and
highly effected sector. The actual situation is not up to the mark as compared to original budget
and the cash inflows of the company is decreases day by day after pandemic. Company needs to
improve their practices and develop the plan strategically and smartly so that no conflict will
arise in future and also the owner and manager should be motivating their employees or labours
so that they do their best.
After Covid-19 the firm needs to reduce the risk of over staffing and under staffing and also
reduce the expenses and improve the sales per unit cost. The organization have to work
effectively and efficiently and assure that the cost is not overflow the revenue. Amana Ltd
company need to cover more domestic places for tourism other than international and follow the
rules and guidelines like washing hand, providing clean water and sanitation services. They have
to appoint only those employees who are knowledgeable and specialized in the field of tourism
and communication skills of the employee is also matter.
The organization must use the marketing feature for the awareness about their tourism policy and
provide discount to their client. The company also need to reduce overhead costs by hiring
specific and professional to control Amana Ltd finance, it is the best way to cut costs for a long
period of time. It improves the efficiency and avoid financial mistakes. Material cost, labour cost
and overhead are variable costs and it is directly proportionate to sales per unit cost if the sales
per unit increases, variable cost increases, if the sales per unit decreases, variable cost decreases.
Variable costs overhead is difficult to adjust and thus harder to plan for and develop more
business technology by using social media which help the business to grow.
Use virtual program for the customers to provide the general information about the tourism
places and any other details about travelling Amana Ltd have to focus on planning and profit

margins by remembering the cost of production and variable costs as well. The organization
always try to maintain the quantity of the fixed assets.
PART B
The suggestion that has been given to Amana ltd that whether they should develop their website
for selling their products and services or use the amazon facility:
The business rivals of Mr Amana are increasing their business which the changing
technology with the help of online sources such as like Europe and US. It is necessary of them to
commercialise their operations using an online platform. They can use the following options to
go for online platform to sell their goods and services: -
 By closing down their operation which are being carried out at Birmingham branches,
Manchester and Brighton and going towards selling their product and services by making the
online sales through developing their own website which helps them in increasing their volume
from the present level (Hanif, 2019).
 The expenses that required for them in order to upgrade their business by going
through online has been work out around £50,000, they had to make payment to the IT
personal for maintaining such website will be £ 35000 approx. per annum and they need
to develop the network which cost them £ 15000 approx., hence their total expenses that
has been work out around £ 100000.
 There has been another option which is simply to list out their products and services on
the amazon and pay them fees relating to usage of their platform which provides them the
security regarding the products and services they offer and sales will increase accordingly. In
that case they need to incur around £ 50000 as usage cost and if they plan to develop their own
website then the fixed cost has been incurred by £ 50000.
 The difference that will arise if they set up their own online platform or go with using the
amazon platform has been explained below: -
Basis Amazon facility Setting up their own store

Areas to be covered The targeted customer has been
increased if the business has been
expanded using the online facility
of amazon as they maintained their
goodwill and reputation in the
market.
The maintenance cost is higher to
develop the own website and it will
take time for sales too because
branding is not the one-day process
for any business.
Management If goods are sold to amazon, then
they will have to pay the margins to
them to use their platform and sales
becomes easier as they have the
goodwill in the market and
consumer trust the product they
offer in their portal (Herschung,
Mahlendorf, and Weber, 2018).
The control of such website should
be under the direct control of the
proprietor or their management and
they are responsible if the portal
slows down on business hours will
affect the sales directly of the
business.
Possession The expected cost they need to
incurred which includes designing
cost of the products and services on
the online portal are bear by the
owner of the website and the seller
who sells their goods.
The designing page of the website
along with including and
eliminating any product and
services from the portal is under
direct supervision of the owner
itself and he can manage it
according to his taste and needs.
The following conclusion has been drawn on the basis of above analysis:
 If the Amana develop their own website, then need to invest more funds in development
of them of the website and however if does not provide the business the guarantee regarding their
sales sustainability. But on the other hand, if they continue using the platform built by the
amazon then they can safely carry out the business and continue their sales from the offline store
as well (Krishnan, 2020).
 If they carried out their sales through using their platform their sales figures are being
jumper around 35000 units of the product they sold when the comparative analysis has been

carried out by using amazon platform which simply suggest that revenue got increased if own
portal is developed but cost benefit analysis has been carried out properly.
 The prices offered on using the platform of amazon are being controlled by them as they
also get their margins, but if Amana develop their own website the products and services remains
under control that maintain the customer base.
CONCLUSION
This statement shows the performance of Amana is limited by performing the budget with
the actual performance. Amana ltd has been engaged in the tourism business and they are
planning to open their store instead of selling their product from amazon. At the end of this
report, the recommendation has been given to them that whether they should develop their
website or use the Amazon platform to sell their products and services.

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