Management Accounting Systems of Excite Entertainment Ltd

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INTRODUCTION
In this report, management accounting systems are described in detail which is used by Excite
Entertainment Ltd. Excite Entertainment is a large firm which has obviously evolved in the market
with the change in the demands and mentality of customers. In this report management
accounting is described along with the different report of the management accounting. This
assignment will discuss the types of management accounting and different management
accounting reports. Different planning tools are also compared which are used in management
accounting. It is also described how Excite Entertainment is using managerial accounting to solve its
financial problems.

LO1
P1
MANAGEMENT ACCOUNTING
It is the procedure of maintaining a management report which gives financial data to the internal members
of an organization such as CEO. These reports provide essential data such as availability of cash, work in
hand, pending project, cost of raw material, etc.
These reports provide assistance to the managers by providing day to day statistics. It is a process of
changing financial and statistical data into useful information which can be used by managers to do small
works or day to day activities (Kaplan and Atkinson, 2015).
FINANCIAL ACCOUNTING
Financial accounting is the branch of the specialized accounting which have to track over the
financial transactions of the company. It uses standardized guidelines, the transactions are also
summarized, recorded and also presented in the financial statement and financial report such a
balance sheet and income statement.
Difference between management accounting and financial accounting
Basis Management Accounting Financial Accounting
Legal Requirement It is being at the management
discretion. There is no
compulsion but still, some
formats and framework are
provided by the Institute (Maas
et al., 2016).
It is a compulsory need for
every public organization. They
are being governed by
government and companies
laws and Accounting standard
boards
Format of presentation There is no set format to
present the information in the
management
It has specific formats to record
and present information
Area of coverage within the It is used to take the effective It analyses, classified,

organization decision of the business. summarizes, records the
financial affairs of the
company.
Types of Data used It uses the budgeting, reporting
and sales data.
The financial statements and
accounting equation are used.
MANAGEMENT ACOUNTING SYSTEM
COST ACCOUNTING SYSTEM
This system is utilized by business determination to cost of product. It is system and process that
helps in assessment the product cost at all stages of production. This is also referred as the system
of the product costing. It is the system that is useful to the organization because it can generate
high profitability, it can help in planning for the future projects, it can also help in cutting down cost
and also it can compare the actual cost incurred than the decided budgeted cost.
Direct cost: It is the price that can be attributed to the production of the specific services and
goods. Some costs like administrative and depreciation costs are most tough to assign to the
particular product and called as indirect cost (Narayanaswamy, 2017).
INVENTORY MANAGEMENT:-
Inventory management refers to the management of inventory from raw material to finished
product to storing and warehousing it. Firms use inventory management to cut short the wastage
of inventory. In the big firms where it is difficult to maintain inventory, these use two ways of
inventory management that are just in time and material requirement planning. This can also
increase productivity. Example of this system is LIFO, FIFO and weighted average (Henderson et al.,
2015).

JOB COSTING ORGANIZATION:-
It reflects cost of accounting manufacturing cost of each separate individual unit of goods. This is
useful in the organizations where there are different items manufactured and the cost of each item
is different from the other. As for example This system is also used as a ledger for recording the
manufacturing cost of the inventory, the half-finished product and the finished goods.
PRICE OPTIMIZATION:-
It is a program which mathematically calculates how demands are directly proportional to the price
and how demand varies at the changes in the price and then combines this data with the
information of inventory and finished products to plan the prices for the products which will be
accepted by the customers.
It is an inbuilt system which uses price optimization for gaining profit. It helps in designing price as a
profit lever and helps in providing customer satisfaction (Pratt, 2016).

P2
There are different management accounting reporting systems which must be used by the Excite
entertainment ltd and which are as follows;
Job Costing reports: It reflects the assessment of the costing of the particular job description and
role. This type of report is being utilized by the organization which are relate to the construction
based. The results and outcomes of this reports offers the opportunity for division and there
improvements is also being improved. This act as the gauge for the excite Entertainment ltd that
helps for the future companies and customers for deciding to take a job or not (Kaplan and
Atkinson, 2015).
Budget reports: This report analyses the company performance that will evaluate the techniques
related to cost control. This report helps in measuring the actual organizational performance. It
also helps in increasing motivation of staff to attain the objective that is desirable. It acts as the
internal report for the organization that helps for the integration of the efforts of the various
organizations. The main advantage of this is based on planning (Maas et al., 2016).
Inventory reports: This type of report is also used by the Excite Entertainment Ltd that helps to
provide the details and information that are associated with the inventory, overheads and labour.
The analysis of the inventory report is also done by the organization to make the organization
efficient. The company managers also used to contrast the report for the analysis of the company
performance. This increases productivity and efficiency of the Excite Entertainment Ltd.
Performance reports: This system is prepared by Excite Entertainment ltd that will analyze the
actual revenue and expenditures with the budgeted. The difference between two is called the
variances that are prepared in the report to make the changes. The outcomes of this report assist
managers for estimating their future demands. The main benefit of this reporting is it sets the
benchmarks that help to open to new methods and ideas that can improve efficiency (Kaplan and
Atkinson, 2015).
Advantages of timely production of information accounting to internal and external stakeholders

The stakeholders are internal and external and internal are managers, employees and owners. And
external stakeholders are investors, lenders and the general public. External stakeholders use
relevant information about accounting for making the financial decisions. Business owners also
need relevant information and data on reviewing the income statement. It ensures the inventory
cost that is included in the cost of the goods sold account of the company. Expenses are also
relevant for the sales revenue earned for the accounting period. The business owners must also be
sure that the accounting information must be timely and accurate (Maas et al., 2016).
If the relevant and accurate information is not provided to the internal and external stakeholders
then the stakeholders do not get the idea and information of the financial performance. The
checking of the financial information must be accurate and right and that is only ensured by the
business owners. The external investors will also not get the idea of accurate financial information
if they do not provide with accurate information (Kaplan and Atkinson, 2015).

M1
The different benefits of the system for the Excite Entertainment are as follows:
Cost Accounting Systems: This will help Excite Entertainment to measure the business efficiency
and also to make changes according to that. It also helps to reduce prices. The information gained
will also assist to take decisions and also for future planning (Bromwich and Scapens, 2016).
Inventory management: Using accurate inventory management system the Excite entertainment
ltd can evaluate and measure the inventory orders in an accurate manner. The planning is also
done that reflects the proper allocation of inventory that will help to increase business
productivity.
Job costing method: With the application of this method Excite Entertainment can help to enhance
the work quality and evaluate the work in a proper manner. It also helps in estimating all different
types of cost. Excite Entertainment can also decrease the duplicity in the work.
Price optimizing systems: This system can help Excite Entertainment ltd to segment their
customers. It also helps in knowing the willingness of the customer for paying the product. The
profit is also increased with the use of the amount of price (Bromwich and Scapens, 2016).

LO2
P3 AND M2
Absorption costing: This is the technique that is being utilized for deriving the profit for the
organization and this method uses both variable and fixed cost. This method can be used by the
Excite Entertainment ltd for taking decision that are associated with strategies and it can be utilized
as the external reporting. Excite Entertainment utilizes this technique for analyzing the financial
position and performance. And in this method the good are considered to be variable cost (Smith,
2017).
Marginal costing method : It is technique reflects the utilize of variable cost and there is use of the
both types of costing that are fixed and variable costing. It uses the direct labor, direct materials ,
prime cost with overheads and which can also use by Excite Entertainment ltd managers to take
the decisions. It is also vital to estimate the marginal cost and revenue (Hoozée and Mitchell, 2018).
CALCULATION OF ABSORPTION AND MARGINAL COSTING METHOD
Marginal costing
(cost p.u.)
Absorption costing
(cost p.u.)
Sales £15 £15
Prime cost £4 £4
Variable cost £2 £2
Overheads (Fixed
Production)
- £ 1
Total amount £9 £8

It can be interpreted from the above calculations that the marginal cost p.u. is £9 and absorption
cost is £8. The difference between the costs per unit in both costing method is due to the addition
of overhead for fixed production that can be use of the absorption method.
INCOME STATEMENT (ABSORPTION COSTING)
SALES (8,000 units@ £15 p.u.) 120,000
Less- VARIABLE COST
Prime cost (8,000 units@£ 4 p.u.) 32,000
Variable cost (8,000 units@ £ 2 p.u. 16,000 48,000
CONTRIBUTION 72,000
LESS- fixed cost
Other Fixed cost 40,000 40,000
NET INCOME 32,000
It can also be interpreted from the above calculation is the net income derived from the absorption
coting method is £ 32,000 which includes the deduction of prime and variable cost from the sales.
Also the other fixed cost is also subtracted from the contribution to get the net income from it.

Income statement (marginal costing)
Sales (8,000 units at the rate £15 p.u.) 120,000
(-) Costs
Prime cost (8,000 units at rate £ 4 p.u.) 32,000
Variable cost (8,000 units at rate £ 2 p.u.) 16,000
Fixed production Overheads 40,000 88,000
GROSS PROFIT 32,000
(-) Other fixed overheads 0
NET INCOME 32,000
The net income derived from the marginal costing method is 32,000 where prime cost and variable
cost has also been deducted from sales with fixed overhead cost that has provided gross profit.