Prepare the monthly control report showing original budget, flexed budget, and variances.
Assignment Brief
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Programme:
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BA Business Management
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Module:
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Management Accounting
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Module code:
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LCBB5002
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Contribution to Overall Module
Assessment (%):
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70%
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Lecturer:
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Internal Verifier:
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Assignment Title:
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Assignment 2 Report
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Word count (or equivalent):
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2500
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Submission deadline:
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To be announced by the Assessment team-
Please refer to the assessments schedule published on Students’ Hall in Moodle
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Return date of provisional marks & written feedback:
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After the Exam Board
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Submission method:
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All written assessments, where practical and possible, must be submitted via Turnitin unless otherwise instructed by the Lecturer. (Please DO NOT put this assessment specification into Turnitin or it will match many similarities with other students’ submissions.)
Alternative submission method (if applicable):
Late submission of the assessment will result in a late penalty mark. Penalties for late submission: Up to one week late, maximum mark of 40%. Over one week late, 0%. Only the Extenuating Circumstances Panel may approve a change to submission dates.
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Academic honesty / referencing:
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Academic honesty is required. In the main body of your submission you must give credit to authors on whose research and ideas your work is based. Append to your submission a reference list that indicates the books, articles, etc. that you have used, cited or quoted in order to complete this assessment.
Prepare the monthly control report showing original budget, flexed budget, and variances
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They have been operating a successful business for 40 years and have come to understand the dynamic nature of the tourism industry. Recently, the Covid-19 pandemic broke out in England leading the government to impose restrictions on movement and travel which severely impacted the tourism industry. Amana’s revenue took a big hit in April 2020 as tourists could not travel for the Easter holidays, sales picked up slightly in the summer of 2020; however, the prolonged lock down between December 2020 and February 2021 depleted any additional revenue that had been made in the summer.
Amana Ltd is a family-owned tourist business located in England which sells souvenirs to tourists. They have several locations in tourist hotspots across England namely Brighton, London bridge, Westminster bridge, Buckingham Palace, Birmingham city centre and Manchester city centre. Souvenirs are produced by a Chinese manufacturer specifically according to designs made by the Amana team.
In the past, Amana ltd has only traded within physical stores with a functioning website serving as a channel for marketing their business. Mr Amana, the owner of the business has hired you as a manager and provided a cost break down of their products.
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Original budget (£)
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Actual (£)
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Units
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100,000
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80,000
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Selling price
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25
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20
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Variable costs:
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Materials
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2.50
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280,000
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Labour
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4
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440,000
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Overhead
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1.50
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120,000
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Contribution
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17
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760,000
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Fixed overheads:
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Warehouse rental
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200,000
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170,000
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Insurance
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100,000
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100,000
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Fulltime warehouse supervisor salary
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50,000
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35,000
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*Figures are based on average estimates incurred in producing a mix of souvenirs.
Required:
- Prepare the monthly control report showing original budget, flexed budget, and variances. (25 marks)
- Using your control report prepared in (i) above, prepare a report on Amana’s performance during the year 2020. (20 marks)
- Provide recommendations to Amana’s CEO on areas of improvement. (15 marks) (1500 words, TOTAL = 60 marks
PART B
Mr Amana has noticed that a lot of his competitors now sell online to customers in the UK, Europe and US. He has been considering closing the Brighton, Birmingham city centre and Manchester city centre branches in order to streamline the business activities and move 50% of their sales online. Several factors have to be taken into consideration when making this decision.
- Cost of setting up delivery network – £150,000
- Cost of upgrading current website to handle large volume of sales - £50,000
- Salary of a fulltime IT programmer - £35,000 per annum
- Based on market research, there would be guaranteed sales of 100,000 units annually
The business also has the alternative of selling their products directly on Amazon and would have to take the following factors into consideration when making this decision.
- Amazon fulfilment fees - £50,000
- High levels of competition between Amana souvenirs and other sellers on these platforms – Guaranteed sales of 65,000 units on Amazon annually with the potential to increase depending on demand.
- Lack of control over pricing and return policy.
Required:
In your report, provide an analysis of Mr Amana’s decision to go online and advise if they should set up their own online shop or sell on Amazon. You should take into consideration all the relevant costs. (1000 words, TOTAL = 40 marks)
ALL QUESTIONS SHOULD BE ATTEMPTED
NOTE: The guidance offered below is linked to the five generic assessment criteria overleaf.
1. Engagement with Literature Skills
Your work must be informed and supported by scholarly material that is relevant to and focused on the task(s) set. You should provide evidence that you have accessed an appropriate range of sources, which may be academic, governmental and industrial; these sources may include academic journal articles, textbooks, current news articles, organisational documents, and websites. You should consider the credibility of your sources; academic journals are normally highly credible sources while websites require careful consideration/selection and should be used sparingly. Any sources you use should be current and up-to- date, mostly published within the last five years or so, though seminal/important works in the field may be older. You must provide evidence of your research/own reading throughout your work, using a suitable referencing system, including in-text citations in the main body of your work and a reference list at the end of your work.
Guidance specific to this assessment: Specific to this assignment: At least 12 references need to be cited
2. Knowledge and Understanding Skills
At level 5, you should be able to demonstrate: sound knowledge and critical understanding of the well- established concepts and principles of the subject area and the way in which those principles have developed; knowledge of the main methods of enquiry in the discipline. Knowledge relates to the facts, information and skills you have acquired through your learning. You demonstrate your understanding by interpreting the meaning of the facts and information (knowledge). This means that you need to select and include in your work the concepts, techniques, models, theories, etc. appropriate to the task(s) set. You should be able to explain the theories, concepts, etc. meaningfully to show your understanding. Your mark/grade will also depend upon the extent to which you demonstrate your knowledge and understanding.
Guidance specific to this assessment: A thorough and detailed understanding budgeting and variance in assessing performance and decision making
3. Calculation
Your work must contain clear calculations using professional layout and headings where relevant. Directions for variances should be clearly indicated as either favourable or unfavourable.
Guidance specific to this assessment: A control report should be prepared clearly showing the original budget, flexed budget, actual budget and variances
4. Practical Skills
At level 5, you should be able to use/deploy a range of established techniques within the discipline, and apply underlying concepts and principles outside the context in which they were first studied, including, where appropriate, the application of those principles in an employment context. You should be able to demonstrate how the subject-related concepts and ideas relate to real world situations and/or a particular context. How do they work in practice? You will deploy models, methods, techniques, and/or theories, in that context, to assess current situations, perhaps to formulate plans or solutions to solve problems, or to create artefacts, some of which may be creative. This is likely to involve, for instance, the use of real world artefacts, examples and cases, the application of a model within an organisation and/or benchmarking one theory or organisation against others based on stated criteria. You should show awareness of the limitations of concepts and theories when applied in particular contexts.
Guidance specific to this assessment: The practical application of budgeting, variances and relevant costing in assessing business performance and decision making especially with reference to the current global pandemic.
5. Transferable Skills for Life and Professional Practice
Your work must provide evidence of the qualities and transferable skills necessary for employment requiring the exercise of personal responsibility and decision-making. This includes demonstrating: professional development to advance existing skills and acquire new competences that will enable you to assume significant responsibility within organisations; that you can initiate and complete tasks and procedures, whether individually and/or collaboratively; that you can use appropriate media to effectively communicate information, arguments and analysis in a variety of forms to specialist and non-specialist audiences; fluency of expression; clarity and effectiveness in presentation and organisation. Work should be coherent and well- structured in presentation and organisation.
Guidance specific to this assessment: A report is required, 2,500 words, with appropriate referencing and headings
This section details the extent to which the assessment criteria are demonstrated by you, which in turn determines your mark. The marks available for each category of skill are shown. Lecturers will use the space provided to comment on the achievement of the task(s), including those areas in which you have performed well and areas that would benefit from development/improvement.
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Generic Assessment Criteria
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Marks available
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Marks awarded
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1. Engagement with Literature Skills
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15
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Extent of research and/or own reading, selection of credible sources, application of appropriate referencing conventions
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2. Knowledge and Understanding Skills
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20
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Extent of knowledge and understanding of concepts and underlying principles associated with the discipline.
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3. Calculations
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25
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Clarity and accuracy of calculations. Use of professional and well-structured layout.
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4. Practical Application Skills
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25
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Deployment of methods, materials, tools and techniques; application of concepts; formulation of innovative and creative solutions to solve problems.
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5. Transferable Skills for Life and Professional Practice
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15
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Attributes in professional practice: individual and collaborative working; deployment of appropriate media; presentation and organisation.
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Assessment Mark (Assessment marks are subject to ratification at the Exam Board. These comments and marks are to give feedback on module work and are for guidance only until they are confirmed. )
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Late Submission Penalties (tick if
appropriate)
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%
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Up to 1 week late (40% Max)
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Over 1 week late (0%)
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You need to start answering the assignment questions from here: Prepare the monthly control report showing original budget, flexed budget, and variances.
Sample Answer
Amana Ltd: Performance Evaluation and Recommendations Report (2020)
1. Introduction
Amana Ltd is a family-owned souvenir retail business operating in multiple high-footfall tourist locations across England. Like many tourism-reliant businesses, Amana was significantly impacted by the COVID-19 pandemic, with national lockdowns and travel restrictions reducing tourist numbers and overall sales. This report evaluates Amana’s financial performance for the year 2020 using a control report, identifies key variances, and offers strategic recommendations for improvement.
2. Financial Performance Analysis
To assess Amana’s 2020 performance, a monthly control report was prepared comparing the original budget (based on 100,000 units), the flexed budget (adjusted to 80,000 actual units), and actual performance.
| Category | Original Budget (£) | Flexed Budget (£) | Actual (£) | Variance (£) |
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| Sales |
2,500,000 |
2,000,000 |
1,600,000 |
-400,000 |
| Materials |
250,000 |
200,000 |
280,000 |
+80,000 |
| Labour |
400,000 |
320,000 |
440,000 |
+120,000 |
| Overhead |
150,000 |
120,000 |
120,000 |
0 |
| Contribution |
1,700,000 |
1,360,000 |
760,000 |
-600,000 |
| Fixed Costs |
350,000 |
350,000 |
305,000 |
-45,000 |
| Net Profit |
1,350,000 |
1,010,000 |
455,000 |
-555,000 |
3. Key Variance Analysis
3.1. Sales Revenue Variance (-£400,000)
The most significant variance lies in sales revenue. While 80,000 units were sold instead of the planned 100,000, the average selling price dropped from £25 to £20 per unit, resulting in a 20% revenue loss. This is likely due to lower tourist footfall, forcing Amana to discount products to attract domestic buyers.
3.2. Variable Cost Variances
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Materials (+£80,000): Although the flexed budget expected £200,000 for materials, actual costs were £280,000. This may suggest either a rise in supplier prices, inefficiencies in production, or waste.
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Labour (+£120,000): Labour costs exceeded expectations by £120,000, potentially due to retaining full-time or overtime staff despite reduced demand. Alternatively, it may indicate increased handling or safety protocols during the pandemic.
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Overhead (£0): Overhead costs aligned with expectations, suggesting good cost control in this area.
3.3. Contribution Variance (-£600,000)
Contribution margins dropped significantly. This reflects not just reduced sales but also rising input costs. The combination of lower prices and higher variable costs severely reduced profitability.
3.4. Fixed Costs Variance (-£45,000 favourable)
Amana did well in reducing some fixed expenses. Warehouse rental and supervisor salaries were lower than budgeted, suggesting active cost-saving strategies. However, these savings were not enough to offset larger revenue shortfalls.
3.5. Net Profit Variance (-£555,000)
Overall, Amana earned less than half of the expected flexed profit. This underperformance was driven by falling sales prices, high cost of goods sold, and excess staffing costs during an economic downturn.
4. Evaluation of Business Performance
The 2020 performance reflects a challenging financial year, shaped by external factors beyond Amana’s control. Nevertheless, certain internal decisions may have worsened the situation:
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Pricing Strategy: Dropping the price to £20/unit may have helped stimulate demand but caused a significant drop in margin.
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Cost Control: Rising labour and materials costs indicate weak cost control or poor supplier negotiation during the crisis.
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Sales Model: With reliance on physical stores and little digital sales infrastructure, Amana lacked flexibility to adapt during lockdowns.
Despite the disappointing figures, the business still made a profit (£455,000), which demonstrates resilience. With better planning and digital transformation, Amana can recover strongly.
Continued...
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