In the Context of a Company Entering a Foreign Market

question 60

Multiple Choice

In the context of a company entering a foreign market, identify a difference between licensing and wholly owned subsidiaries.

• A) Licensing is an equity mode of entering a foreign market, whereas wholly owned subsidiaries refer to a nonequity mode of entering a foreign market.
• B) Licensing possesses high risk, whereas wholly owned subsidiaries are subjected to low risk.
• C) Licensing protects intellectual property, whereas wholly owned subsidiaries are prone to losing their intellectual property.
• D) Licensing creates distance from customers, whereas wholly owned subsidiaries provide direct exposure to local customers.

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Definitions:

Standard Quantity

The budgeted or pre-determined amount of material or input expected to be used during a manufacturing process.

Standard Hours Allowed

The time that should have been taken to complete the period’s output. It is computed by multiplying the actual number of units produced by the standard hours per unit.

Material Price Variances

The difference between the expected cost of materials and the actual cost incurred, useful in budgeting and cost management.

Labor Efficiency Variance

A measure used in cost accounting to gauge the difference between the actual hours taken to produce a good or service and the standard hours expected, multiplied by the standard labor rate.