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Questions and Answers
Why do businesses lose money in international transactions?
What is the primary purpose of a good cost-accounting system for imported or exported products and services?
What can lead to businesses losing money in international transactions?
What allows organizations to accurately determine the related costs for international transactions?
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In what situation does a good cost-accounting system become essential for businesses involved in international transactions?
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What is the consequence of not having a good cost-accounting system for businesses involved in international transactions?
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What is the primary focus of economists in cost analysis?
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Which division of accounting is focused on creating periodic financial statements?
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What is the primary purpose of bottom-up analysis in cost management?
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What is the main area of focus in cost management?
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What type of analysis focuses on 'exceptions' in an organization's budget?
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Study Notes
International Transactions and Cost Management
- Businesses can incur losses in international transactions due to exchange rate fluctuations, tariffs, and unexpected costs that may arise during shipping and customs clearance.
- A good cost-accounting system for imported or exported products and services primarily aims to accurately track and allocate costs, enabling better financial decision-making and pricing strategies.
- Factors leading to financial losses in international transactions include poor currency management, high shipping costs, inadequate risk assessment, and lack of knowledge about foreign markets and regulations.
- Accurate determination of related costs for international transactions is facilitated by comprehensive cost-accounting systems that incorporate all expenses, including direct costs and overheads.
- Involving multiple currencies, international regulations, and logistics complexities makes a robust cost-accounting system essential for businesses engaged in international transactions to maintain financial viability.
- The absence of an effective cost-accounting system can result in missed financial insights, inability to price products competitively, and overall financial mismanagement, increasing the risk of losses.
Economic and Accounting Focus
- Economists in cost analysis primarily focus on understanding how resources are allocated and the implications of costs on economic efficiency.
- The division of accounting that specializes in creating periodic financial statements is known as financial accounting, providing insights into a company’s overall financial position.
- The primary purpose of bottom-up analysis in cost management is to gather input and insights from operational levels of the organization to formulate realistic budgets and forecasts.
- Cost management centers on controlling and reducing costs while optimizing resource use to enhance profitability and efficiency within an organization.
- Exception analysis in an organization's budget identifies and examines variances from expected performance, highlighting areas that require attention or corrective action.
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Description
Learn about pricing and costing in business with this instructional material for the course ENTR 20083. Understand the principles of pricing, costing, and profit maximization in entrepreneurship.
