Management Accounting Report: Budgeting, Variance Analysis, Amana Ltd

This management accounting report evaluates the monthly budget of Amana Ltd, focusing on flexible and original budget variances. It computes the financial year's performance using monthly control reports and offers recommendations for improvement. The report examines Mr. Amana Ltd's decision to open an online store, elaborating on the settlement of online merchandise with Amazon by observing the total cost. It also compares setting up an official website versus using Amazon, highlighting the costs and benefits of each approach, and emphasizes the importance of online trading for reaching a wider customer base. Desklib is a platform where students can find similar solved assignments and study resources.

Management Accounting

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
Monthly report evaluation that present the flexible and original budget variances........................1
Computation of the financial year performance of the business by using monthly control report
that are mentioned above:................................................................................................................3
Recommendation that are given to the manager of the Amana Ltd for improving the path. ........5
PART B............................................................................................................................................5
Examination of the decision of the Mr Amana Ltd. Regarding the opening of a online store and
elaborate the settlement of online merchandise with Amazon by observing the total cost.............5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
A budget refers an an ideal which mentions the level for earning of human being and the
corporation. This assist in evaluating the need of the money which will needed in an
organisation. This is a process to examine the capability of a business firm which expend money
in a particular time which is set up through an organisation. Budget will be utilized to predict the
position of financial of business and results in further time period(Hiromoto, 2019). This help to
planning and analyse the performance or action of a company which can involve in expansion of
fixed assets, functioning of training to the workers, setting up plan which is related to bonus and
many more. The budget is being made on the basis of need of the company such as quarterly,
monthly, half yearly and many more. This is very essential part to make a budget before putting
action in plan of the project. This consists of expenses list and revenue. This process assist for
earning the profit and to control over expenditure too. In this report, the discussion or
examination mention the statement which is made on the base of the month and prepare or make
the budget for Amana Ltd. That are evaluate and estimated the differences and variances.
Examination of this performance or action which have been done in the time of pandemic.
PART A
Monthly report evaluation that present the flexible and original budget variances.
 Monthly control report - This helps in providing the important data that keeps both the
cost direct and indirect such as wages, expenditures, salaries and overheads. This report
helps in evaluating the operation activities cost for selecting the other cost that how to
reduce the activity cost. It helps in furnishing of the internal data of the business that
connects with the upcoming income of the business or that can occur in the
future(Hutahayan, 2020). These type of income occur in the specific time period in the
upcoming future . This report is basically prepared on monthly basis. This report assess
the financial performance of the company. It aids organisation in taking correct decision
in order to reduce the variance.
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 Original budget - This budget is totally depended on the past information that appeared
the production and value level in last time. Managers of the business found this a very
easy and simplest way to evaluate the performance of the business entity in the
upcoming future budget. This helps in analysing the earnings and the flow of income in
the future organisation. This describes the difference between the fixed budget which
can not be flexible and the real budget for identifying the status of the income and
expenditures of the business firm .
 Flexible budget - This budget helps in adjusting the actual levels of revenue. This
budget is also known as variable budget . This budget prepares a financial plan of
prescribed revenues and values on the actual amount of output. This adjust the volume
level of the company . This budget comes into force after completing the financial
budget. It assist to focus on the specific cost that can be create in the business enterprise.
It decides the variable and constant cost according to the actions. Flexible budget is
distributed into two parts that is variable and semi variable. Variable cost are fluctuating
and the semi variable cost are both fixed as well as variable also.
 Budget Variance - This shows the difference between the estimated and real budget.
Budget variance is favourable when the actual expense is less than the budget and the
actual revenue is higher than the budget(Mahmoudianand and et, al., 2021). This an an
term of accounting which determines example where actual costs are may be higher or
lower than the predicted cost. Analysis of budget variance will determine the reason of
failures. It helps in identifying the trends to bring success in the company . A negative
impact of budget variance will reclined toward the shortfall of budget.
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Computation of the financial year performance of the business by using monthly control report
that are mentioned above:
There are certain steps which can be used for the evaluation of Amana Ltd monthly control
report which are discussed below -
 Track the expenses - This is one of the important part of the financial budget that
assists to monitor and having a record of the overall cost. By keeping daily records of the
expenses like receipts , invoices and other expenses helps in betterment of the financial
budget. This type of statements are made annually but the manufacturer overemphasize
its plan to monthly(Ghasemi, and et, al., 2019). This helps managers in saving the cost
and also in taking decision in future.
 Evaluation of the range that comprises excess expenses - It represent the evaluation
of budget during the planning and it also helps in analysing that specific area which
charge extra cost and also try to reduce the cost and expenses by taking the decisions
correctly and efficiently.
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 Oversee and evaluate the space that contains over cost - In this the manager of the
company do comparison and direct the area that carry an high cost or low cost on the
particular operation of business activity at the time of planning with the help of these
steps(Nielsen, 2018).
Analysation of the budget that is prepared for the Amana Ltd. Monthly report are
discussed below:
 Flexible budget reflects the less trade revenue in comparison of real budget. It reflects
that the business has to increase and maximize the level of production while increasing
the selling price. It assists organisation to increase the level of income on annual basis.
The product selling price is £25 and 100000 units are already sold according to the
original budget. It reflects that the basic budget is lower than the original budget. Due to
the differences in the cost business enterprise can also get changed.
 Raw materials and variances of law carry very high cost. The cost is £280000 which is
exactly 10% less than the real cost and the selling price is 10% per unit this is according
to the real budget. So the entity has to reduce the cost of raw material which help in
recapture of expenditures(Bracci, and et, al., 2022).
 Manufacturer assist the production of unit which is usually done monthly by them . In
flexible budget the direct cost are getting reduced due to which h the labour cost are
getting minimized..
 On the basis of precious plan , the business gross profit is getting reduced by 55.29%.
operational activities are related with the result of the income and revenue that reflects
the gross profit and also the expenditures of the organisation.
 Overheads which are constant or same are examine in the storage lase, remuneration
and securities also . Funds that are in the beginning that are achieved from the present
idea are more higher than the last constant cost.
 Previous ideas has more benefits for the business corporation because the current profit
is less by 66.30% from the previous one . This should be closed for declining the
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expenditure of both fixed as well as variable also. With the help of budget the company
can view the status of the organisation.
Recommendation that are given to the manager of the Amana Ltd for improving the path.
 The main purpose of the company is to focus on the profitability of the organisation. This
is recommended to the manager of the company that they should concentrate on the
manufacturing of the products unit for increasing the level of production so that they can
increase the quantity of product in business firm. When it comes to the cost then the firm
should work on it precisely and with utmost sincerity(Gogaev, and et, al., 2019)). Above
mentioned things are very important for the organisation so it should be consider in
appropriate manner.
 The manager as well as owner of the Amana Ltd both should be aware about the price of
the raw material because it affects the real budget . Wastage of any material can lead to
increase the funds and can also increase the material cost. Sop the managers should need
to make the plan or a strategies to look on this.
 It is also recommended to the manager that they should not do any kind of change or
modification in labour cost because the labour cost affects the production of the business.
It can reduce the production unit by minimizing the labour cost .
PART B
Examination of the decision of the Mr Amana Ltd. Regarding the opening of a online store and
elaborate the settlement of online merchandise with Amazon by observing the total cost
The members at Amana Ltd. are setting up their online stores in several nations like United
Kingdom, United States and Europe. The company have to adopt the modern techniques such as
online trade rather than the traditional way.
 Mr Amana Ltd. has done its 50% of its online sales in Manchester and Brighton(Gottlieb,
and et, al., 2021). The company have to consider their fixed costs for compensation such
as the transportation costs, social sites costs and coding costs. Beyond the fixed costs the
company have make sure that they will sell 100000 units in the financial year. The costs
which can be incurred are explained below-
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 Mr Amana Ltd. Can use different alternatives for trading their goods and services
through Amazon, in which they can give them lump sum payments for their satisfaction.
The company have to make sure that they are selling 65000 units in the financial year
and also have to engage in making the marketing strategies to raise the demands of the
products. The total cost which can be incurred is written below-
Amazon is a recognized brand and it is a brand which used by many individuals around the
world. The brand is having a different identity of providing quality of goods at lower prices. The
brand is having a global reach among its customers, which simply means it is having a huge
customer base(Juliana, Gani and Jermias, 2021). For Mr Amana Ltd. It is necessary to trade
through online platforms to reach maximum number of customers. If the company is thinking of
setting up their official website than it will need a lot of time and huge amount of capital
investments. This will reduce profit as the cost will be increased.
Differences between setting up the official website and doing business with Amazon are
described below-
Basis Amazon Developing online store
Scope Amazon already have a large
consumer base which will be a
benefit for the company as
they can opt for the 40% of
Developing new website will
require time and it is difficult
to build the customers
immediately.
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their sales from Amazon per
year.
Management The website of Amazon is
handled by their managers.
There is no need of any
personnel of Mr. Amana Ltd.
While doing the business with
Amazon.
The owner of the business
have to manage the website as
the company is a sole
proprietor company. If there
are any changes in the website
then they can be done by the
owner easily.
Cost The cost required for doing the
business with Amazon is
£50000.
The company is required to
brought up a capital of
£235000 if they have to set up
their own website. There are
many expenditures which will
be incurring while setting up
the website.
Data Amazon is having a huge
amount of data of many sellers
which will help Mr. Amana
Ltd. In dealing with the trade
of products and services.
The company have to do a
research for developing their
own website. The company
have to start from scratch and
have to face a lot of issues
while collecting the desired
information about customers.
Control Amazon will not have any
control over their costs and the
policies which have been
drafted on the return of the
goods and services.
If they launch their own site
then they are able to overcome
the changes or modification in
the price and quantity of
commodities .
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From the above differences, it can be examined that-
 If the company will opt for their own official website then they have to introduce heavy
amount of capital(Massicotte and Henri 2021). Whereas doing business with Amazon
will incur less costs for the company and they can earn more profits. So it is more
convenient to invest in Amazon for their online trading of products and services.
 Through Amazon the business can have a surety that they can sell more rather than from
their own website. They can sold 35000 units more than there own website by using
Amazon.
 If the company is opting for Amazon then the company do not have to manage the
website but if they select to build their own website then they will have to hire a
manager which can help them managing the website.
 It is suggested for Mr. Amana Ltd. From the above report that if they use their own
website for selling goods and services then they have to achieve the highest sales in
order to gain profit.
CONCLUSION
From the above report it is concluded that the business and the individuals should not be
dependent on budgeted value or other sources which come under the head of cash and the
revenues. It is important for the managers to prepare monthly control report as it helps in
providing data like direct and indirect wages and salaries. This report helps in the evaluation of
the costs which have been incurred in the particular month. For a company it is important to get
a overview of the original budget which can be on the past information or past sales. Also the
company is needed to make a flexible budget which helps them in adjusting the actual levels of
the revenue. The flexible budget prepares the sheet of the actual values and the actual amount
incurred. This report is the evaluation of the monthly control report of the company. The main
purpose of this report is to examine the differences which can be incurred between the real
budget and the basic budget which is made. Also the analysis is made on whether the company
should made their own website or use Amazon. The company is suggested to opt for Amazon as
they have global reach and have access to many customers. The company can sell more products
and earn more profits by selling through Amazon.
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REFERENCES
Books and Journals
Hiromoto, T., 2019. Restoring the relevance of management accounting. In Management Control
Theory (pp. 273-288). Routledge.
Hutahayan, B., 2020. The mediating role of human capital and management accounting
information system in the relationship between innovation strategy and internal process
performance and the impact on corporate financial performance. Benchmarking: An
International Journal, 27(4), pp.1289-1318.
Mahmoudianand and et, al., 2021. Inter-and intra-organizational stakeholder arrangements in
carbon management accounting. The British Accounting Review, 53(1), p.100933.
Ghasemi, and et, al., 2019. The effectiveness of management accounting systems: evidence
from financial organizations in Iran. Journal of Accounting in Emerging Economies.
Nielsen, S., 2018. Reflections on the applicability of business analytics for management
accounting–and future perspectives for the accountant. Journal of Accounting &
Organizational Change.
Gogaev, and et, al., 2019. Zootechnical and management accounting factors of beef cattle: cost
optimization. Research journal of pharmaceutical, biological and chemical
sciences, 10(2), pp.221-231.
Juliana, C., Gani, L. and Jermias, J., 2021. Performance implications of misalignment among
business strategy, leadership style, organizational culture and management accounting
systems. International Journal of Ethics and Systems.
Massicotte, S. and Henri, J.F., 2021. The use of management accounting information by boards
of directors to oversee strategy implementation. The British Accounting Review, 53(3),
p.100953.
Gottlieb, and et, al., 2021. Institutionalised management accounting and control in farm
businesses. Scandinavian Journal of Management, 37(2), p.101153.
Bracci, and et, al., 2022. Risk management and management accounting control systems in
public sector organizations: a systematic literature review. Public Money &
Management, 42(6), pp.395-402.
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