One Reason the Total Sum of the Income Categories Does

question 27

Multiple Choice

One reason the total sum of the income categories does not equal GDP is that

• A)GDP values goods and services at market prices and the income approach values them at factor cost.
• B)GDP values goods and services at retail prices and the income approach values them at wholesale cost.
• C)taxes are generally larger than subsidies and the depreciation of capital is negligible.
• D)GDP does not include depreciation,which is part of the income categories.
• E)people do not spend all their income,so the value of consumption expenditure is less than the value of wages.

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Definitions:

Direct Labor Cost

The total cost of all labor directly involved in the production of goods or services.

Activity-Based Costing

A financial allocation practice that designates overhead and indirect costs to related products and services, determined by the activities they necessitate.

Unit Product Cost

The total cost (both fixed and variable) to produce one unit of a product.

Traditional Costing System

An accounting method that applies indirect costs to products based on a predetermined overhead rate, without distinguishing between activities or processes.