Countertrade Involves the Linking of an Import and an Export

question 19

Essay

Countertrade involves the linking of an import and an export transaction in a conditional manner. Discuss the drivers of countertrade and outline the various forms it can follow.

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Definitions:

Fixed Overhead

Fixed Overhead refers to the indirect costs of production that do not vary with the volume of production, such as salaries of managers, rent of factory, and depreciation of equipment.

Standard Cost System

A system of accounting that uses predetermined costs for calculating variances and tracking operational performance.

Job Order Cost System

A cost accounting system in which costs are assigned to each job or batch.

Overhead Volume Variance

The difference between the expected (budgeted) and actual overhead costs attributed to a change in production volume.