In a Simple Circular-Flow Diagram, How Are Total Income and Total

question 76

Multiple Choice

In a simple circular-flow diagram, how are total income and total expenditure interrelated?

• A)They are seldom equal because of the dynamic changes that occur in an economy.
• B)They are equal only when all goods and services produced are sold.
• C)They are always equal because every transaction has a buyer and a seller.
• D)They are always equal because of accounting rules.

---

Definitions:

Factory Overhead

This refers to all the indirect costs of production that are not directly tied to a specific product, including utilities, maintenance, and salaries of non-direct labor employees.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or job orders, calculated in advance based on estimated costs and activity levels.

Materials Requisition

The form or electronic transmission used by a manufacturing department to authorize materials issuances from the storeroom.

Materials Ledger

The subsidiary ledger containing the individual accounts for each type of material.