Accounting
What is a Cost Driver?
A cost driver is any factor that causes a change in the cost of an activity. In cost accounting, identifying cost drivers helps allocate indirect costs more accurately. Examples include machine hours, labor hours, or number of setups.
What is privatization in a business context?
The transfer of ownership or control from the public sector to the private sector.
Why does the problem of scarcity lead to the need for economic choice?
Because resources are limited but wants are infinite, individuals and societies must decide how to allocate resources efficiently among competing uses.
What is the break-even point?
The break-even point is where a business covers all its fixed and variable costs, meaning profit is zero. It's a key concept in cost-volume-profit analysis.
Define nationalization and explain its opposite relationship to privatization.
Nationalization is when the government takes ownership of private firms — the opposite of privatization.
Explain how a change in the price of a good affects both the substitution and income effects on demand.
A price increase causes consumers to substitute towards cheaper alternatives (substitution effect) and reduces real purchasing power (income effect), both lowering quantity demanded.
Which is the only method of investment appraisal that uses profit?
The Accounting Rate of Return (ARR) is the only investment appraisal method that uses accounting profit rather than cash flows. It calculates the return on investment based on net income and book value.
How should multinational corporations manage differences in employment laws across countries?
By adapting to local legal requirements while aligning policies with global corporate standards and values.
What is OC, explain how opportunity cost influences decision-making for consumers, firms, and governments.
Consumers weigh alternative uses of income; firms consider production trade-offs; and governments face policy choices, such as spending on healthcare versus education — all reflecting the cost of forgone alternatives.
The main weakness of Payback Method?
The Payback Method only measures how quickly an investment can recover its initial cost, ignoring any benefits that occur after the payback period and not accounting for the decreasing value of money over time.
How does integrating Corporate Social Responsibility (CSR) into corporate strategy influence a firm’s long-term sustainability compared to pure profit maximization?
CSR fosters enduring stakeholder trust, brand equity, and risk reduction, supporting sustained profitability beyond short-term financial gains.
Discuss how the price mechanism acts as a signal, incentive, and rationing device in resource allocation.
Rising prices signal increased demand, incentivising producers to supply more, while rationing limited goods to those most willing to pay — together guiding efficient allocation of resources.
Benefit of a Trial Balance?
A trial balance helps verify that all entries in a double-entry accounting system are correctly recorded. While it doesn’t catch all types of errors, it ensures that for every debit, there is an equal credit.
How does deregulation simultaneously create opportunities and vulnerabilities for small firms in competitive markets?
Deregulation reduces compliance costs and barriers to entry, enabling flexibility, but it also exposes small firms to intensified competition and market volatility.
Define market failure and evaluate one policy the government might use to correct it.
Market failure occurs when free markets misallocate resources. For example, negative externalities like pollution may be corrected through taxes (Pigovian taxes), though such measures risk overregulation or unintended side effects.