Subtracting the Purchase of Intermediate Products and Supplies from the Value

question 81

Multiple Choice

Subtracting the purchase of intermediate products and supplies from the value of the sales of final products determines the amount of:

• A) Net investment for a business
• B) Profit and cost
• C) Value added from the economic activity
• D) Surplus or deficit from the economic activity

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Definitions:

Variable Costs

Costs that change in direct proportion to changes in levels of activity or production volume, such as materials and labor.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance, necessary for running a business.

Break-Even Point

The juncture where the overall expenses match the total income, resulting in neither a profit nor a loss.

Variable Costs

Costs that vary directly with the volume of production or service delivery, such as materials and labor.