Analyzing Amana Ltd's Financial Health: A Management Accounting Report

This report provides a comprehensive analysis of Amana Ltd's financial performance, focusing on management accounting principles. It examines the impact of the COVID-19 pandemic on the company's operations, utilizing variance analysis to assess the differences between budgeted and actual figures. The report identifies both favorable and adverse variances across various cost categories, including materials, labor, and overhead. Furthermore, it evaluates the effectiveness of Amana Ltd's performance in 2020 and offers suggestions for future improvements, such as sourcing materials from lower-cost suppliers and optimizing workforce management. The report also explores the potential of online sales strategies, comparing the costs and benefits of selling products through the company's website versus utilizing platforms like Amazon, ultimately recommending Amazon for its cost-effectiveness and broader customer reach. This detailed analysis aims to provide insights into Amana Ltd's financial health and guide strategic decision-making.

Management
accounting

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
Monitoring statement every month..............................................................................................1
The effectiveness of Amana in the year 2020.............................................................................2
Suggestion for a better future of the firm....................................................................................4
PART B...........................................................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Estimations are critical in determining a company's total expenses. As per studies,
expenditures can be created in a range of methods (Abou Taleb and Al Farooque, 2021).
Finances have even been determined to be among the most significant elements in assisting a
business in determining its future course of action. In this ongoing discussion, the conclusions
and variances made in a generated budgeting have received a lot of attention. This article focuses
on Amana Ltd., which has particularly heavily struck by the COVID-19 outbreak. In accordance
to the existing subject, the functioning of this corporation has indeed been analysed. This
criterion was used to evaluate the company's production variances. Also covered in this interview
is whether Mr. Amana needs to execute his business activities online, and if so, in an effective
and concise way. As per the report's results, the company has undergone both good and negative
fluctuations. In this instance, it is recommended perhaps the company focus on hiring workers
that would not cost too much to the company, because this would help the company minimize
adverse variability. Mr. Amana is indeed urged to sell the products on Amazon, because this
would save company money.
PART A
Monitoring statement every month
Particulars Original
budget Actual Variance
Units 100 000.00 80 000.00 20 000.00
Price (Selling) £ 25.00 £ 20.00 £ 5.00
Costs (Variable)
Materials £ 250 000.00 £ 280 000.00 -£ 30 000.00
Labour £ 400 000.00 £ 440 000.00 -£ 40 000.00
OH £ 150 000.00 £ 120 000.00 £ 30 000.00
Contribution £ 1 700 000.00 £ 760 000.00 £ 940 000.00
Fixed OH
Rent (Warehouse) £ 200 000.00 £ 170 000.00 £ 30 000.00
Insurance £ 100 000.00 £ 100 000.00 £ -
Salary (Fulltime warehouse supervisor) £ 50 000.00 £ 35 000.00 £ 15 000.00

Based on the previous information, it have further established that now the figure may
comprise the three key budgeting elements. The original planning, actual expenses, and
variations for Amana Ltd have all been recorded in the present financial strategy module's
structure (Aldehayyat and Maan, 2013). Preliminary planning is a process devised by a business
in attempt to decide its budgetary obligations. In other words, first budgeting can be described as
the expected financial overview produced by businesses in order to determine the entire spending
of the firm. In terms of the preliminary budgeting, it should be mentioned that this would be a
forecasted statement (financial) that supports a firm in maintaining cash flow as well as a
breakdown of revenue and loss. Furthermore, while considering flexible budgeting, it is revealed
that this would be a method that responds to a range of changes in volume or performance. This
form of predicting has been shown to be far highly sophisticated and successful when compared
to a predefined approach. Static planning has already been found to be one where the projected
amount somehow doesn't change. While the aforementioned statistics being contrasted to the
numbers stated while generating and approving a static spending plan, it was determined that
they were similar. Since it includes variable costs, the volume of the flexible budgeting is also
noted to fluctuate. Aside from that, this has been determined that flexible planning is one of the
finest effective instruments an organisation can employ to assess its overall efficacy. This topic
has already been proven to encompass variations in addition to certain sorts of budgets. Variance
is the difference between the original estimate and the amount recorded in the actual budgeting.
It is also discovered that the changes may take two kinds, namely favourable and adverse
variability. Constructive variation can be described as a difference (favourable) between original
estimated amounts and actual spending. An adverse variability when such actual expense is
considered to be greater than the first projected figure.
The effectiveness of Amana in the year 2020
In the instance of Amana Ltd, it was revealed that perhaps the firm is primarily engaged in
the tourist industry (Azudin and Mansor, 2018). The COVID-19 outbreak have revealed
and shown to have caused a major negative impact on organisations, notably some in the
hospitality industry. In the situation of Amana Ltd, this has recently been determined that
perhaps the epidemic has harmed the company's output. In order to assess the profitability of
such a specific company in 2020, the expected and actual amount of spending were taken into

consideration. In order to undertake that kind of a discussion efficiently, both favourable and
adverse variables must be factored into the equation.
Depending on the indicated spending, the variance was investigated in the first part of the
report. The business also had favourable and unfavourable anomalies based on the variances, this
one was found. The company chose to provide £100,000 parts at a cost of 25 pounds, as per the
managerial evaluation. However, the actual figures was estimated to be £ 80 000 at a price of £
20. In this case, the firm may be said to have neglected to supply the desired amount of things at
the estimated cost. Furthermore, while variable expenses are taken into account, it is observed
that the company does have a range of characteristics. Since these things are seen in this light, it
is determined that perhaps the products would then value the company £ 250 000, whereas the
logistics would amount to £ 280 000. The business entity also revealed to be vulnerable to
negative variation in this situation (Brink, Hobson and Stevens, 2017). Moreover, when
evaluating staff, it is determined that now the company has experienced negative variance in this
sector as well. The company budgeted £ 400 000 for personnel, however the actual cost of labour
was £ 440 000. Once all expenses are taken into account, the company makes a £30,000 gain.
Throughout this aspect, this one was found that the company originally budgeted £ 150 000 in
operational costs, but only £ 120 000 was actually spent. Furthermore, it became noticed that the
company initially budgeted £ 1 700 000 for donations, but only received £ 760 000. As a
consequence, the company's favourable variance in this situation was determined to be £ 940
000.
The company's variance is demonstrated to be favourable when fixed expenses are taken
into consideration. Whenever the warehouse lease is considered, it is found that the company
originally budgeted £ 200 000 for lease, but the actual costs being £ 170 000. As a consequence,
with that kind of a positive variance of £ 30 000, the difference is indeed not unfavourable in this
circumstance. Once the safety is taken under consideration, however, it is determined that the
company originally budgeted £100,000 and as such the actual spending was indeed £100,000. As
a consequence, no favourable or adverse distinctions could be found in this situation. Apart from
it though, once the remuneration of a retail director is included, the company have recorded £ 50
000 as the original investment (projected). However, the true cost being stated as £ 35,000. As a
consequence, because the preliminary planned cost is greater than that of the actual spending,
there seems to be a favourable variance of £ 15 000 within that situation. It has been discovered

that now the business indeed has favourable and unfavourable variances as a consequence of
these kind of expenses (Holzer and Schoenfeld, 2019).
Suggestion for a better future of the firm
This was revealed that Amana Ltd started having major challenges relying upon the above
findings. It was determined that now the company had undergone some negative changes in this
area. As a consequence, a couple of key recommendations were being made to help the company
improve its overall performance. First and foremost, it’s been suggested that perhaps the firm
ensure that resources are purchased from a supplier which provides things at quite a lower price.
It might thus be argued that it might help the business in obtaining a favourable variance
notwithstanding an adverse variable in this regard. In addition, the organization must ensure that
the workers are hired through reputable sources. Apart from it though, the company
recommended employing skilled workers since it could help the company reduce its personnel
expenditures. As a consequence, these are one of the most critical recommendations already
provided to the business in order to assist it in improving administrative performance.
PART B
Mr. Amana have chosen to sell his wares via the web, as per the circumstances. It may give
businesses a better chance to increase their overall revenue. In regards to Mr Amana's decision, it
could be argued that Mr Amana has alternative possibility for electronically advertising company
goods (Hyndman and McKillop, 2019). As a result, Mr. Amana has chose to sell his products on
Amazon. Amazon is one of the most prominent online advertising channels, enabling both
companies and customers to benefit tremendously. Upon that basis of these options, it is
conceivable to infer that those are profitable options. As a result, the company must ensure that
practically every one of the crucial aspects of online advertising are taken under consideration. In
this regard, it was observed that when a company chose to sell its products via the web, it should
consider a range of factors. Depending on the information given, it is concluded that the business
may require the creation of a supply network. As an outcome, the company would be charged £
150 000 as just a direct consequence of this circumstance. Moreover, it was revealed that now
the company needed to update its present website and ensure that it might handle a huge number
of activities. Throughout this scenario, it is predicted that such a company would invest £50,000
in certain way. Moreover, the company is required to implement specific Technology charges,

and in this instance would amount to £ 35,000. Those are only a couple of minor considerable
charges that the company should bear when distributing its products online through its website.
If a company chose to sell its products on Amazon, though, it is clear that the business
would have to spend in some critical processes (Isaac Roque and Cañizares Roig, 2019). This
one was revealed throughout this instance that perhaps the company is compelled to pay
Amazon's shipping cost, which could also cost the company £ 50,000. Apart from it, Amazon's
return and exchange procedures expose the company to such vulnerabilities. Mr. Amana has
already been recommended to select the second of the two options provided to them. As an
option, it is suggested that Mr. Amana sell his products on Amazon, because it would help the
company in a number of ways. Initially and foremost, this have been demonstrated that selling
items on Amazon could reduce the company funds while selling products digitally. In this
regard, it is fair to suggest that electronically selling the products on Amazon might have proved
more expense reducing for the company. Furthermore, supplying its product on Amazon has
already been found to help the company expand its customer base, as Amazon seems to have a
vast customer base that could help this particular company expand at such an annualised level of
selling. Aside from that, a company obtains the benefit of never being to worry about security
risks. Network safety procedures are in operation at Online exchanges including Amazon and
Alibaba to secure confidential material. As a consequence, if Amana Ltd conducts business
through Amazon, the company would profit in order to determine the dependability. Apart from
that, Amazon has indeed been designated as one of the most dependable digital advertising
websites that could help this company increase its revenue through online shopping. It is vital for
the company to ensure that it has been carrying out the necessary sequence of advertising
initiatives in way to lure the suitable demographic. This would help the company achieve its
goals more efficiently. Aside from it, its been established that through advertising products on
Amazon, the company benefits through Amazon's image. These are only a couple of minor
considerable benefits which a company can obtain by selling its products on Amazon (Kramer,
Maas and Van Rinsum, 2016).
Despite the fact that the company chooses to sell its products on Amazon, it also suffers by
Amazon's shortcomings. This one was found in this situation that now the company should pay
Amazon for the delivery costs. Apart from it though, the company's return policy could offer a
significant danger to the company (Miles and Miles, 2019). In this instance, if the customer is

displeased with the product, the customer would usually receive a full reimbursement. It
invariably results in a loss for the seller's business. As a consequence, it's possible that Mr.
Amana's decision to engage in commerce on Amazon would be another of the company's
significant drawbacks. Despite this drawback, it is advised that the company promote its
products electronically on Amazon since they would cost the company just under delivering the
items globally on their personal website. Amana Ltd has also been determined to have had a
series of benefits which might aid the company in obtaining equally financial and non-
financial benefits (O'Dwyer and Unerman, 2016).
CONCLUSION
To conclude, management accounting provides complete investment and material flow data
which enable the company to meet anticipated demands and make prompt critical choices
depending on existing information. By separating the benefits of using this approach against the
flaws it uncovers, the company might develop protracted methods for assessing its quality
standards. Crucially valuable, the company must focus on providing financial records in a
reliable and correct way. On the basis of the preceding, it is reasonable to conclude that Amana
Ltd is good at controlling its expenses. Once the financials of a company are investigated, both
favourable and unfavourable variances are revealed. Because the bulk of the variances are
favourable, the company is motivated to be successful in this area. Apart from it though, Mr
Amana should consider selling his products on Amazon.

REFERENCES
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