Describe the Famous Triangular Trade of the Seventeenth Century

question 61

Essay

Describe the famous triangular trade of the seventeenth century.

Identify the conditions under which average costs fall or rise due to marginal costs.

Recognize the reasons behind the shape of average cost curves.

Differentiate between diminishing returns to scale and decreasing returns to scale.

Understand factors leading to diminishing marginal returns.

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Definitions:

Total Cost Variance

The difference between the budgeted or standard cost of production and the actual cost incurred.

Direct Materials Price Variance

The difference between the actual cost of direct materials used in production and the standard cost, indicating cost management efficiency.

Direct Materials Quantity Variance

The discrepancy between the true usage of direct materials in production processes and the forecasted standard usage, multiplied by the standard unit cost.

Total Direct Materials Cost Variance

The difference between the actual cost of direct materials used in production and the standard cost of those materials.