Explain the Difference Between GNP and NNP

question 65

Essay

Explain the difference between GNP and NNP. Explain why NNP is sometimes a better measure of how the economy is doing than GNP is.

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Definitions:

Contribution Margin

A financial metric that represents the difference between a product's sales revenue and its variable costs.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a unit of product.

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a unit of product.

Inventory

Items held for sale in the ordinary course of business, as well as supplies and materials used in producing goods for sale.