Management Accounting Report for Amana Ltd: Performance and Strategy

This management accounting report provides a comprehensive analysis of Amana Ltd, a tourism business. It begins with an introduction to management accounting principles and then delves into a monthly control report, comparing actual performance against the original budget for the year 2020. The report highlights significant unit sales decline, reduced customer prices, and variances in material and labor costs. It offers recommendations for improving performance, including expanding the B2B network, maintaining original budget prices, and reducing variable costs. The report also explores the strategic decision of whether Amana Ltd should establish its own online shop or sell through Amazon, providing a cost analysis for each option. The conclusion favors establishing an independent online shop due to greater control over pricing and branding. The report emphasizes the importance of flexible budgeting, clear goals, and leveraging data for improved cyber security.

Management
accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
PART A...........................................................................................................................................3
Monthly Control report of Amana Ltd........................................................................................3
Report on Amana's performance during the year 2020...............................................................4
Recommendations for improvement...........................................................................................4
PART B............................................................................................................................................6
Analysis for decision to go online...............................................................................................6
Advise about whether to set up online shop or sell on Amazon.................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management accounting refers to the procedure of identifying, measuring, analysing and
communicating financial data and information to senior management to attain organizational
goals. This includes the presentation of financial information for internal purposes by senior
management for use in making important business decisions. This includes cash flow analysis,
product costing, budgeting, trend analysis, and forecasting (Alves and Garza-Reyes, 2021). This
report contains the analysis about Amana Ltd, a tourist business about its monthly control report
showing variances. It also includes Amana's performance comparing its actual and original
budget. The report recommended the ways to improve the performance. Furthermore, it is
concluded by the decisions regarding the business to go online or to go from own website or sell
through amazon.
MAIN BODY
PART A
Monthly Control report of Amana Ltd.
A budget is a tool for tracking when and how you make and spend money. This allows you to
monitor and better understand if your business has enough revenue to pay for it. Budgets help
you make more informed financial decisions. It helps in many ways, including setting short- and
long-term goals for business growth, tracking income, expenses and cash flow, and keeping
financial records. Budget variance is an accounting term that describes situations where actual
costs are higher or lower than standard costs. Unfavourable or negative variance indicates budget
shortfalls that may arise due to lost revenue or higher than expected costs. Deviations can arise
from internal or external causes and include human error, low expectations, and changing
business or economic conditions (Atkinson, 2021).

Report on Amana's performance during the year 2020
Amana's performance has been underperforming against its original budget throughout 2020 due
to a significant unit sales decline of 20,000 units, which was the main reason for the
underperformance. The price the customer charges has been reduced to his 20 units, which is the
main reason for the decrease in total sales of 900,000 units. In terms of variable costs, material
costs are 30,000 significantly higher than originally budgeted and labour costs are 40,000
significantly higher than originally budgeted. Both of these variable costs are negatively
impacting Amana's performance, but overhead costs have been cut by his 30,000, which is a
good sign for the company compared to the original budget. Looking at revenue and variable
costs, Amana's contribution has decreased by a total of 940,000. Fixed costs include warehouse
rents reduced by 30,000 and insurance premiums in line with the original budget, so there will be
no impact on Amana's performance (Booth, 2018) . Salaries for full-time warehouse managers
have also been cut by 15,000, which has a positive impact on the company's performance. After
analysing sales and individual expense burden, Amana's profit was significantly reduced by his
$895,000. Looking across Amana Ltd's data, there are several ways to improve performance
compared to the original budget. One just need to keep the budget simple and flexible, and easily
track everything that needs to be booked. When preparing an initial budget for a specific period,
Amana, Inc. involves everyone. This means all departments listen and understand their needs. To
predict your company's future financials, you need to have clear goals. There is an adverse
discrepancy between budgeted and actual costs. This is because Amana isn't sticking to its
original budget and needs to review all its expenses and find ways to reduce the amount it spends
on variable or fixed costs. One can also include rent in the total cost. Now that we know how
much it will cost, Amana will have to cut wages by reducing the number of employees and hiring
people who work at lower wages. This helps ensure that household wages are met and not
wasted (Căpușneanu and Marin-Pantelescu, 2020).
Recommendations for improvement
Amana strongly recommends improvements in many areas, such as expanding its B2B network.
The original budget price of £25 should be maintained, so there is no need to lower the unit
price. If one wants to attract more tourists instead of lowering prices, reach out to existing
customers, offer special packages, encourage customers to leave reviews, ask for

recommendations, Amana Ltd blogs should be able to start. In order to increase Amana's profit,
it is necessary to reduce variable costs. In order to properly manage materials and match the
original budget, we replace materials with the lowest possible cost, reduce waste, eliminate
unnecessary features of the product, find more suppliers and facilitate negotiations (Hajiha and
Sarkhani Ganji, 2020). Some techniques to reduce labour costs are how to provide good training
to potential employees. Companies need to implement lean manufacturing that eliminates non-
value-added processes in manufacturing, and insert processes such as standardization. This
increases economies of scale and overall production. If all of these are sold by Amana Inc., the
labour price will correspond to the value of the original budget and have a positive impact on the
company's profits. Overhead costs are already lower than anticipated in the original budget, and
the company must maintain the same level of overhead costs in the future or it will adversely
affect the company's bottom line (Kiamehr and Gharehkhani, 2019). Amana Ltd is require to
maintain the same contribution as the original budget in order to achieve the minimum return.
Regarding fixed cost, there is warehouse rentals which actually incurred less than what
anticipated in the original budget. It seems to be positive for organisation but they are required to
maintain their rentals so that they does not go beyond limits. Insurance incurred was as per the
expected figure, hence there seems no problem. But Amana should go for reduced insurance
amount so that their profits will increase from aniticipated level in near future. Full time salary of
warehouse supervisor salary is occurred less than what is anticipated in original budget, it affects
the profits of Amana Ltd positively but need to make sure about maintaining same salary for
their supervisor even when there is extra no of units to be sold. There are many ways to increase
Amana revenue in order to compensate prolonged lock down period between December 2020
and February 2021, they need to adopt new technologies to find the way for grab any future
opportunities, they need to shift over phone and video meeting for over communicate to their
clients. Amana operating since last 40 years in tourism industry their CEO still need to focus on
those critical areas like many businesses in Europe, US and UK now selling their souvenir online
which brings a lot of competition in this industry (Pratheepkanth, 2018). So one need to maintain
own website or update the current one to focus on attracting customers and most importantly
build a supply chain network across the UK. The dynamic nature of the tourism industry is hit
hard in the pandemic situation. To overcome this, strategies such as social media fan offers and
digital his coupons that can only be used by social media followers should be put in place. Some

companies may ask their customers to prepare an Easter song and send a video. Meanwhile,
Amana Ltd wisely invests in promotional his campaigns, offering free shipping and free gift his
wrapping to all online customers. Amana must commit to building or adding to mailing lists and
using or updating customer relationship management tools. You need to segment your customer's
prospect list, customize messaging, and break it down into prospects like previous prospects.
Customers, niche markets, missed opportunities, more customers met before, etc (Ringelstein,
2018). Amana's CEO wants the idea group to have flexible budgets and set clear goals for each
business division or unit. , budgets should be consolidated and shared with everyone in the
company. There are few areas where Amana's CEO needs to leverage data and work on
improvements to ensure the cyber security of the company and its employees.
PART B
Analysis for decision to go online
As competition intensifies in the UK, Europe and the US, Amana needs to sell customers online
without delay. If this company does not do business online, it will have to sell its souvenirs
through various centres with declining sales. This is because customers can find alternatives
online and set comparable prices. That means you should shop online instead of offline (ter Bogt
and Scapens, 2018). Amana is considering closing stores in Brighton, Birmingham city centre
and Manchester city centre to streamline operations and move 50% of his sales online. This
bodes well for businesses as it saves them on variable and fixed costs and helps increase the
company's profitability. Amana looking to go online is a must because of its 24/7 availability,
which helps improve its tourist image and helps address customer complaints quickly.
Considering very low start-up and setup costs. After closing some stores, Amana targets all
sectors of the global market because once its employees go online, they can work from
anywhere, thus reducing operating costs. They compete with global market leaders by creating
aesthetically designed websites with high quality product photography, offering attractive
discounts or offering free shipping on their products (Vakhrushina and Grishanova, 2018).

Advise about whether to set up online shop or sell on Amazon
After the decision to go online, now analysing that whether to set up its own shop or sell on
amazon by doing analysis with given data. If they set up their own website they will incur the
following costs by the guaranteed sales 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
Full time IT programmer salary £35,000
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Total £235,000
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This total costs incurred during the whole year with sales of 100,000 units which will give per
unit cost of £2.35.
Amana Ltd has alternative of selling their products directly on Amazon and would have to incur
following cost by guaranteed sales of 65,000 units annually:
Amazon fulfilment fees £50,000
As mentioned above, Amazon has no control over pricing. In other words, Amazon has its own
private label products. This means that you order the goods from the supplier, pay for the goods
and determine the price of the goods on the website. It simply means that there is a higher risk of
loss for Amana and that the seller has another reason to lose money. They have a return policy
where souvenirs are returned by customers. Amana is unsure of selling products online through
Amazon as they have no price control and return policy as only 65,000 units can be purchased.
Amazon charges fulfilment fees from vendors. On the other hand, they can sell their products
through their own website, and a guaranteed sale of 100,000 units will earn him £235,000. This
means paying him £2.35 for each unit of production sold. Amana can be used for a long time
because you can control the price so that you can sell your souvenirs at any price through
promotional discounts. With guaranteed sales, you can sell more and operate 24/7 from
anywhere (Zou and Xiao, 2019).
By analysing his two decisions above, he concludes that there are more advantages to setting up
his own website and selling online compared to selling on Amazon. This is because when Amana
sells through Amazon, there is a lot of competition and lack of control in all product categories.
This means that Amana has very limited resources for brand presence. There is an opportunity to

increase sales by using Amazon, but there are fulfilment costs. Selling on your own website has
other benefits such as: B. Give Amana control, from content to design. They control customer
targeting by personalizing mailing lists and targeting social media marketing campaigns. Having
our own site allows us to find customers anytime, anywhere, even after hours, and Amana's site
continues to attract new customers. As you can see from the above data, 100,000 unit sales are
guaranteed or can be reached and more profitable. That's because Amana can find ways to reduce
operating costs such as staff wages, rent and utilities. Eliminating these overheads allows Amana
to lower prices and give your business a real competitive advantage.
CONCLUSION
It is concluded from the above report on Amana Ltd in which Part A creates the deviation of the
actual budget from the original budget. Also included is a report on Amana's 2020 performance
in terms of budgets made and variances incurred. Additionally, the report provides
recommendations to Amana's CEO on areas for improvement. The Part B report also briefly
analyses Amana's decision to sell online, and offers advice on setting up his own online store and
his Amazon sales. She concludes that Amana needs to start selling online soon to be competitive.
One may want to sell through own website for many reasons, including managing the business
website.

REFERENCES
Books and Journals
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Atkinson, A.A., 2021. Management accounting. Pearson Education Limited.
Booth, P., 2018. Management control in a voluntary organization: accounting and accountants in
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economy: evolution and perspectives. In Improving business performance through
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Kiamehr, M. and Gharehkhani, F., 2019. Investigating the Probable Factors Affecting the Design
of Accounting Information System.
Pratheepkanth, P., 2018. Management accounting revolution developed and developing country.
Ringelstein, D., 2018. Time-Driven Activity-Based Cost Accounting: A Critical Review. Journal
of New Business Ideas & Trends, 16(3).
ter Bogt, H.J. and Scapens, R.W., 2018. Institutions, Situated Rationality and Agency in
Management Accounting: Extending the Burns and Scapens Framework. Available at
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Vakhrushina, M.A. and Grishanova, S.V., 2018. Integrated management accounting in the
financial management system. Research Journal of Pharmaceutical, Biological and
Chemical Sciences, 9(3). pp.808-813.
Zou, T. and Xiao, X., 2019. A three-dimensional model featuring material flow, value flow and
organization for environmental management accounting. Journal of Cleaner
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