FELM4026 Spring 2019: Management Accounting Assignment Analysis

This assignment solution for FELM4026, Financial and Economic Literacy for Managers, addresses key concepts in management accounting. It begins with an exploration of consumer sovereignty and its impact on business, followed by an analysis of different market structures, including perfect competition, monopoly, oligopoly, and monopolistic competition. The assignment then delves into financial management, contrasting profit maximization and wealth maximization, and discussing their implications for investment decisions. Furthermore, it examines fiscal policy and various governmental policies, such as environmental and supply-side policies, along with tendering and privatization. The assignment provides a comprehensive overview of financial and economic principles relevant to managerial decision-making.

Running head: MANAGEMENT ACCOUNTING
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MANAGEMENT ACCOUNTING

MANAGEMENT ACCOUNTING 1
Table of Contents
Q1...............................................................................................................................................2
Q2...............................................................................................................................................3
Structure of market.................................................................................................................3
Q3...............................................................................................................................................5
Q4...............................................................................................................................................6
Fiscal Policy...........................................................................................................................6
Environmental Policies of the United Kingdom Government...............................................7
Supply Side Policies in the United Kingdom.........................................................................7
Focused and competitive Tendering..................................................................................8
Privatization.......................................................................................................................8
Q5...............................................................................................................................................8
References................................................................................................................................10

MANAGEMENT ACCOUNTING 2
Q1.
Consumer sovereignty can be termed as the economic concept which reflects the controlling
power of the customers over the custody of the scarce resources. The client's spending power
implies they successfully vote in favour of products. The major criteria of the business
depend upon the customers and their preferences prevailing in the market. Consumer
sovereignty is one of the forms of the capitalism. There are different opinions about the
different authors and consumer sovereignty is myth therefore the business tends to take
support of the marketing techniques so that the customers are getting the products on the right
time.
Profit Maximization is said to be, for limited time run or the short run technique by which an
organization can characterize the info, cost, and yield levels that outcome in the most
astounding benefit. This idea pursues the neoclassical methodology as indicated by which
financial matters centre around characterizing the yields, salary circulation, and merchandise
through interest and supply and it has a wide implication in the theory of the consumer
sovereignty. The clients will pick the most affordable items that give the best quality as they
are typical individuals who comprehend their own needs and needs. They are said to be
sovereigns or lords of their own lives. It is the purchaser power which states that a market
works effectively and expertly since it gives a reward to the business that is efficient and can
offer items that are required by the clients according to their needs and the preferences.
Generally the term is used in both the descriptive and the normative format. Under this theory
the customers reflect their preferences and what type of goods and services are required by
them so that the manufacturers are able to produce the same. Moreover there is a resource
scarcity and hence not all the requirements are met. Hence the customers are liable to make a
choice out of the best available products at the current prices (Spash and Dobernig, 2017).
Maybe a couple of the needs of the clients will be higher and pressing in contrast with others.
In this manner, the clients will be prepared to pay additional costs for these required
administrations and products. This mirrors the producer of those administrations and
cooperative attitude gain higher benefit. On the off chance that the clients wish for explicit
administration or item and the item isn't required by the clients at pressing premise, at that
point he/she won't pay additional costs and will attempt to buy that item at lower costs.

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Makers of these administrations and items should manage less benefit in contrast with the
makers of items with higher interest. Since the maker has motivation revenue driven, they
will clearly make more items that are by and by in the intense interest among clients.
On the opposite side, the supply of the services may likewise have an impact on the esteem
set by the clients on that item. At the point when an item has low an incentive in the brain of
the clients, at that point that item is fabricated in high supply, at that point the clients will at
that point want to pay low costs for a similar item. On the other hand if the manufacture tends
to create the limitation on the products because of the low demand then the relate value in the
mind of the customers will increase and even at the higher costs the customers are ready to
pay. Therefore it can be stated that the cost plays a major role in determining the measure of
the relativeness along with the profit maximisation in the mind of the customers (Durden,
2018).
Q2.
Structure of market
A market is said to be the arrangement of vender and purchasers, generally denoted to
mediators, who through their interface, both potential and genuine, characterize the
arrangement of products and cost of the goods and the services. The key factors determining
the essence of the market are the agents, buyers, suppliers, negotiating parties, the degree of
competition as well as the product differentiation, also the strength and the purchasing power
of the buyers and the sellers.
The market structure is bifurcated into the following categories namely perfect competition,
Oligopoly, monopoly and monopolistic. A detailed analysis of each term is done below.
Perfect Competition – It is the most efficacious market where items are fabricated with the
assistance of effective techniques and high measure of elements. Intense competition is the
key factor of this type of the market. Other than this, this market offers homogeneous items to
the clients without any artificial restrictions and the knowledge of the market. There is a
complete absence of the rivalry among the individual firms. Monopoly – Monopoly is a
market circumstance in which there is just a single merchant of an item with obstructions to
section of others. The item has no nearby substitutes. The cross versatility of interest with
each other item is low. This implies no different firms produce a comparative item. Dealers in

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this market attempt to make separated offers for assorted fragments of the client and with
regards to value; they openly utilize an ad, individual selling, and marking so as to separate
their administrations. One of the biggest example of the Monopolistic market is Tesco. Tesco
sets the price according to the market forces and there are no such substitutes available in the
market than can curtail the prices (Edquist and Zabala‐Iturriagagoitia, 2015).
Oligopoly –
Oligopoly is the market structure where the business has few major overwhelming
organizations that have power over the market. In the oligopoly advertise, there are various
exit and section obstructions like a colossal speculation, and so on. The pharmaceutical
industry is considered to be the oligopoly due to the staggering costs required to develop and
market any new drug. On an average it can cost more than 1 billion in development of the
drug. With those kinds of accelerating costs only a handful companies such as Novartis,
Merck, Pfizer are there which are able to afford the cost of the development. There is a lot of
interdependence in case of the oligopolistic market. Sellers can reduce or increase the price
for the whole oligopolistic market by selling more quantity or less and affect the profits of the
other sellers. The government also grants those companies with the patents on their drugs
thereby reducing the competition (AZ Central, 2015). McDonald's is viewed as a feature of
the Oligopoly showcase as it could be seen that the organization is the main organizations in
the business of inexpensive food, in the universal market. McDonald's is one of the top
businesses in conveying burgers alongside KFC, Burger King, KFC, and so forth. These
information confirmations that McDonald's is the piece of the oligopoly advertise structure as
a result of it the organization that is ruling the whole inexpensive food industry (Barra, 2012).
Monopolistic –
Monopolistic challenge alludes to a market circumstance where there are numerous
organizations selling a differentiated item. "There is rivalry which is sharp, however not
impeccable, among numerous organizations making fundamentally the same as items." No
firm can have any noticeable impact on the value yield approaches of different merchants nor
would it be able to be affected much by their activities. In this manner monopolistic challenge
alludes to rivalry among countless delivering close however not ideal substitutes for one
another. A sound example of this type of market is hairdressers and salons (Price, 2017).

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Q3.
The job of a financial supervisor is to take right choices, inside firm and guarantee successful
use of assets, so as to continue development of the association.
(A)
Two ideas are noteworthy from the point of view of money related administration, for
example profit maximisation as well as the wealth maximisation.
The term profit maximisation ensures the growth and the stability of the business in the long
run whereas the wealth maximisation is used to attain the grater share and the in enhancing
the growth opportunities of the business. A noteworthy contrast between wealth
maximisation and profit maximisation is examined and the results stated as profit focus is on
around expanding the transient profit of the firm. The long term growth and the sustainability
are associated with the wealth maximisation and ultimately one cannot over rule the presence
of the other. A firm lessens their costs with the intend to catch bigger piece of the overall
industry in the business in case of the concept of the wealth maximisation whereas in case of
the maximisation of the profit the firm raises costs of items to build their margins and income
Profit maximisation majorly keeps its supervision on increasing the efficiency as well as the
effectiveness of the firm whereas wealth maximisation aims at spouting the value of the key
stakeholders of the firm. Profit maximisation neglects the aspect of risk and uncertainty
within business, whereas wealth maximisation has this core feature where both the concepts
are considered in the organisational practices (Queen, 2015).
From the point of view of the investment purposes the firms that adopts the concept of the
profit maximisation tends to make the low level of the investment due to the limited earnings
on the contrary in case of the firms adopting for the concept of the wealth maximisation the
investment is bound to be heavy to meet the long term sales objectives of the firm.
Talking about the likenesses between the hypotheses of profit maximisation and wealth
maximisation, it has discovered that both go for accomplishing the target of expanding the
total assets. Both the hypotheses used to contemplate the money related position of firm over
a specific period, and guarantee high development later on (Welch, 2017).
(B)

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There are many organisations of the contemporary nature and the major guidelines and the
objectives stipulated by them are different in case of the wealth as well as the profit
maximisation. Under the concept of the wealth maximisation it is stated as superior in nature
than the profit maximisation. This is because the wealth maximisation is based on the cash
flows of the firm and the gives more importance towards the expected returns whereas the
profit maximisation merely deals with the figures and the numbers and tends to book the
profits as an when they accrue (Queen, 2015).
Also, it has been discovered that profit maximisation objective of the firm is momentary
situated goal, and does not thinks about the dangers or vulnerabilities of the firm; hence, it
prompts serious issues in the firm. As in the short-run, hazard factor can be disregarded
however chance can't be overlooked in the long haul in any business element. It
straightforwardly influences the interests and validity of different partners, towards the firm,
which influences the general notoriety of the business (Heminway, 2017).
It very well may be shown through a model: for example an association named as PC Ltd. is
engaged with the assembling of vehicles, will require taking right choices which will profit
them in long-run. Subsequently, it very well may be expressed that in thought to the action of
everyday choices, benefit amplification is significant for any business. Then again, to
guarantee taking right choices which influence the interests, qualities, and fulfilment of the
key partners of the organization, riches augmentation ought to be considered by the
supervisors (Queen, 2015).
Q4.
Fiscal Policy
Fiscal strategy is said to be the financial arrangement through which the administration
manages its level of spending to regulate the economy of the country. Fiscal policy and
strategy is the manner in which the administration utilizes spending plan and decides the
impact of the movement over the economy, asset portion, and the pay dispersion which
originates from various segments. The major purpose of using the policies of the fiscal nature
is because of the direction provided by the government in order to achieve the objectives.
One of the most influential and the globalised economy is of United Kingdom’s (Host bull,
2015).

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The economy of the United Kingdom is presently clearly confronting the most noticeably
awful issues of financial aspects in current history. They are managing some separate issues
like the substantial spending deficiency, joblessness, and so forth. Be that as it may, today the
fiscal strategy isn't being used at a larger amount in the cutting edge arrangement of
economy; however, this hypothesis can bolster the nation from inflation as well as the
recession. The major problems faced by the economy of the United Kingdom are surge in the
inflation, spending of the consumers is low and the productivity of the economy remains low
in the pre-crisis. In order to save this the company shall increase the tax content of the higher
slab to rotate the money at the lower level (Economic Help 2019).
Environmental Policies of the United Kingdom Government
Notwithstanding the UK's generally great execution, natural measures could be improved if
the UK Government adopted a progressively eager strategy to execution. A significant
number of the worries rose with us around EU arrangement identified with usage. Some
might want to see EU law connected all the more thoroughly to ensure the earth. Others saw
decreasing the expenses to business as key. UK gained the 10th rank for the kind of the
policies and the environmental context they have developed (House of Commons, 2015).
Notwithstanding having solid natural fustian, gifts for green energy have been chopped down
in the present years, and the administration association has reinforced arrangement for atomic
power and fracking. Market-based bodies have kept on telling natural strategy, coordinating
with the arranging frameworks so as to secure the green belts over the urban area (Osborn,
2017).
The Prime Minister of the nation wants to blend the Energy and Climate Change Department,
with the recently presented Department for Industrial Strategy and Business, Energy. A large
number of the arrangements identified with nature are as yet being characterized by the
European Union. While a portion of the post-Brexit flights are possible, the United Kingdom
is foreseen to keep the immense responsibilities (House of Commons, 2015).
Supply Side Policies in the United Kingdom
Budgetary deregulation
Deregulation is the term in which the government reduces or tends to eliminate the
restrictions on the industries (The balance, 2015). It removes the regulations which were

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interfering in case of the counties who wanted to operate at overseas level. Not only was this
the deregulation also subjected to the guideline over the profitability and the liquidity due to
which several financial instruments were born such as derivatives, credit default and a lot
more (Economics Help 2017).
Focused and competitive Tendering
Competitive offering turned out to be increasingly regular during the 1980s. Open
administrations which used to be controlled by nearby chambers were compelled to put their
administrations to aggressive offering, enabling privately owned businesses to win the
privilege to run administrations for a fixed number of years. This system of the competitive
offering was majorly used by the privatized railways at that time( Edquist and Zabala‐
Iturriagagoitia, 2015).
Privatization
In the year 1980 there was an introduction of the conservative party which later turns out to
be the most comprehensive policy of the year. This policy is termed as the privatisation
where the state owned assets are given to the private sector. The basic ideology behind this
concept is to increase the earnings and create a sense of competition amongst the industries.
The major companies that were being privatised were the BT, British Airways, along with the
several other electricity gas and the major utilities companies (Sustainable Governance
Indicators 2017).
Q5.
5A 2017 2018 2017 2018
CURRENT RATIO
Current Assets 3277 2460 1.16 1.17
Current Liabilities 2833 2097
QUICK RATIO
Quick Assets 2229 2000 0.79 0.95
Current Liabilities 2833 2097
DEBOTRS PAYMENT
PERIOD

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Debtors * 365 791320 709925 103.4 103.2
Sales Turnover 7653 6876
STOCK TURNOVER PERIOD
Stock *365 91250 75920 15.79 14.21
Cost of goods sold 5778 5342
5B Nature Lump Sum
Value 105
Interest 2.75
Months 36
Rate per month 0.23
Amount to be deposited today $96.69
5C YEAR PROJECT A PROJECT B
0 -175000 -175000
1 0 60000
2 0 30000
3 0 25000
4 0 20000
5 175000 40500
Net present value ($43,456.03) ($24,141.65)
The project B shall be selected as the net present value is $24141.65 and this will be repaid
earlier in terms of the Project A. But, the positive NPV determines the company is able to pay
the costs acquired for the investment made. The positive NPV results in the acceptance of the
project whereas the negative NPV results in the rejection of the project. Hence, both the
project shall be rejected.

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References
AZ Central, (2015) Examples of Oligopoly Markets [Online]. Available from
https://yourbusiness.azcentral.com/examples-oligopoly-markets-6720.html [Accessed 24th
April 2019]
Barra, D. (2012) How is McDonald’s considered a oligopoly? [online]. Available from
https://economicsofmcdonalds.wordpress.com/2012/05/03/how-is-mcdonalds-considered-a-
oligopoly/ [accessed 24th April 2019]
Durden, O. (2018) Concepts of Consumer Sovereignty [online]. Available from
https://bizfluent.com/about-6653775-concepts-consumer-sovereignty.html [Accessed 24th
April 2019]
Economic Help (2019) UK Fiscal Policy [online]. Available from
https://www.economicshelp.org/macroeconomics/fiscal-policy/uk-fiscal-policy/ [accessed
24th April 2019]
Economics Help (2017) Supply Side Policies [online]. Available from
https://www.economicshelp.org/macroeconomics/economic-growth/supply-side-policies/
[accessed 24th April 2019]
Edquist, C. and Zabala‐Iturriagagoitia, J.M., 2015. Pre‐commercial procurement: a demand
or supply policy instrument in relation to innovation?. R&D Management, 45(2), pp.147-160.
Heminway, J.M., 2017. Shareholder wealth maximization as a function of statutes, decisional
law, and organic documents. Wash. & Lee L. Rev., 74, p.939.
Host bull, (2015). The 7 scariest challenges facing the British economy, according to analysts
[online]. Available from https://www.businessinsider.com/what-will-happen-to-the-uk-
economy-brexit-2017-7?IR=T [Accessed 24th April 2019]
House of Commons, (2015) EU and UKEnvironmental Policy [online]. Available from
https://publications.parliament.uk/pa/cm201516/cmselect/cmenvaud/537/537.pdf [accessed
24th April 2019]
Osborn, D., 2017. The impact of EC environmental policies on UK public administration.
In European Environmental Law (pp. 117-127). Routledge.

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Price, R., 2017. The modernization of rural France: communications networks and
agricultural market structures in nineteenth-century France. Routledge.
Queen, P.E., 2015. Enlightened shareholder maximization: is this strategy
achievable?. Journal of Business Ethics, 127(3), pp.683-694.
Spash, C.L. and Dobernig, K., 2017. Theories of (Un) sustainable consumption.
Sustainable Governance Indicators (2017) Environmental Policies [online]. Available from
http://www.sgi-network.org/2017/United_Kingdom/Environmental_Policies [accessed 24th
April 2019]
The balance, (2015) Deregulation Pros, Cons, and Examples [online]. Available from
https://www.thebalance.com/deregulation-definition-pros-cons-examples-3305921 [accessed
24th April 2019]
Welch, D., 2017. Consumption and teleoaffective formations: consumer culture and
commercial communications. Journal of Consumer Culture, p.1469540517729008.
1.

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