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40 ICWA Questions And Answers

1⟩ Explain an Oligopoly?

Oligopoly is a market where the supply is controlled by a small group of companies. In this condition, the actions of one company will have a material effect on the entiremarket for a product.

Several characteristics of an Oligopoly:

1) Substantial barriers to entry

2) Market dominated by a few large firms

3) Differentiated products

4) Price rigidity


2⟩ Explain the average standard of living in Africa?

It is extremely low. Africa is the most impoverished continent on the face of the planet. The average African has scarce access to safe drinking water and most commonly lacks plumbing. "Informal housing" is the rule with electricity and safe transportation remaining luxuries. Even life style attributes taken for granted by the average Mexican or Russian are out of reach for many Africans. In terms of employment, many Africans are unemployed or employed in agriculture.

Sub-Saharan Africa in particular is one the world's poorest regions. According to the World Bank 74.9% of the population lived on less than $2 a day in 2003; 44% lived on less than $1 a day.


4⟩ Define abnormal cost?

Abnormal cost indicates that cost which is normally not incurred at a certain level of output under normal circumstances.


5⟩ Define controllable cost?

Controllable cost indicates that cost which can be controlled by a specific number of persons in the organization


6⟩ Define normal cost?

Normal cost indicates that cost which is normally incurred at a certain level of output under normal circumstances.


7⟩ Define uncontrollable cost?

Uncontrollable cost indicates that cost which cannot be controlled by a specific number of persons in the organization.


8⟩ Define cost center?

Cost center is defined as a location, person, or item of equipment in relation to which costs may be ascertained and used for the purpose of cost control. Identification of a cost center is a prerequisite for the successful implementation of the cost accounting process as the costs are ascertained and controlled with respect tot the cost centers. In many cases cost centers are termed as Responsibility Centers.


9⟩ Define cost accountancy?

Cost accountancy is the application of Costing and Cost accounting principles, methods, and techniques to the science, art and practice of cost control and the ascertainment of profitability as well as the presentation of information for the purpose of managerial decision making.


10⟩ List the different types of cost?

Following are the different types of cost:

★ Direct Cost

★ Indirect Cost

★ Fixed Cost

★ Variable

★ Semi-variable cost

★ Controllable cost

★ Uncontrollable cost

★ Normal cost

★ Abnormal cost


11⟩ Define sunk cost?

Sunk cost indicates the historical cost which has been incurred in the past. This type of cost is not relevant in the decision making process. For example-while deciding about the replacement of a machine, the depreciated book value of the machine may not be relevant in the form of sunk cost.


12⟩ Explain the advantage of mixed economy system?

Advantages are:

1) People can make there own decisions

2) The government has limited control, which is good for structure

3) Provides freedoms such as Enterprise, ownership, Social Welfare, Profit Earnings, Political Freedom

4) All national resources are utilized under mixed economy.

5) It will activate the government support and direction.


13⟩ Explain the difference between marginal cost and marginal costing?

Marginal Cost is the amount at any given volume of output by which aggregate costs are changed if the volume of output is increased or decreased by one unity. The aggregate costs consists of both, fixed cost and variable cost. In simple words, marginal cost indicates the per unit variable cost.

Marginal Costing is on the other hand is the ascertainment, by differentiating between fixed costs, variable costs, of the marginal costs and of the effect on profit of changes in volume and type of output.


14⟩ Explain what kind of market demand and supply information would be useful to you in deciding upon a business strategy?

Market Demand and Supply Information:

A customer-filled form of the following fields will be of great use.

1) Do you need product urgently

2) How many times have you visited our store

3) Was the proper information provided to you

4) Were you attended properly

5) Can you afford to pay more for a quick delivery

6) Have you ever used our product

7) How do you know about our product


15⟩ List the objectives of cost accountancy?

Following are the objective of cost accountancy:

★ Ascertainment of cost and profitability with the help of various principles, methods and techniques.

★ Cost control

★ Presentation of information to enable managerial decision making.


16⟩ List the types of cost centers?

Types of cost centers:

★ Impersonal cost center - consists of location or item of equipment. Example-department, branch etc.

★ Personal cost center - consists of a person or a group of persons. Example - finance manager, sales manager etc.

★ Production cost center - is the one where the production activity is carried on. For example, paint shop, a machine shop, etc.

★ Service cost centers - is the one which assists the production activity. For example, store department, internal transport department, labour office, accounts department, etc.


18⟩ Explain what are the differences between absolute advantage and comparative advantage?

Absolute advantage and comparative advantage are two basic concepts to international trade. Under absolute advantage, one country can produce more output per unit of productive input than another can. With comparative advantage, if one country has an absolute (dis)advantage in every type of output, the other might benefit from specializing in and exporting those products, if any exist.

A country has an absolute advantage economically over another, in a particular good, when it can produce that good at a lower cost. Using the same input of resources, a country with an absoluteadvantage will have greater output. Assuming this one good is the only item in the market, beneficial trade is impossible. An absolute advantage is one where trade is not mutually beneficial, as opposed to a comparative advantage where trade is mutually beneficial.


19⟩ Explain the difference between simple average method and weighted average method?

Under Simple average method the simple average of the prices of the lots available for making the issues is considered for pricing the issues. After the receipt of new lot, a new average price is worked out. This method is suitable if the material is received in uniform quantity.

Under Weighted average method the price of each lot and the quantity of the same is considered. This method proves to be very useful in the event of varying prices and quantities. It is very simple to calculate.