The Circular Flow Model Is Used to Show the

question 12

Multiple Choice

The circular flow model is used to show the

• A)recycling process of production materials.
• B)flow of supply and the flow of demand.
• C)flow of expenditures and incomes in the economy.
• D)flow of renewable natural resources.
• E)expansions and contractions of economic activity.

---

Definitions:

Absorption Costing

A product costing technique that adds up all manufacturing expenses — direct materials, direct labor, variable, and fixed overheads — into the comprehensive cost of the product.

Net Operating Income

The total profit of a company after operating expenses are subtracted from operating revenues.

Variable Costing

A costing method in which all variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) are treated as product costs, while fixed overhead is treated as a period cost.

Absorption Costing

An accounting method that includes all manufacturing costs in the cost of a product, including fixed and variable costs.