Why Aren't Intermediate Goods Counted in GDP

question 53

Essay

Why aren't intermediate goods counted in GDP?

Differentiate between the FIFO and weighted-average methods in process costing.

Assess the impact of lean production on process costing and equivalent units of production.

Understand the principles and objectives of activity-based management.

Differentiate between unit-level, batch-level, product-level, and facility-level activities.

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Definitions:

Unit Product Cost

The total cost (both direct and indirect) associated with producing one unit of a product, used in pricing and profitability analysis.

Absorption Costing

A method of accounting that incorporates all costs related to manufacturing, including direct materials, direct labor, as well as both variable and fixed overheads, into the product's price.

Unit Product Cost

The cost assigned to a single unit of product, encompassing all the costs incurred to produce, manufacture, or acquire that unit.

Absorption Costing

A method in accounting that totals up all expenses of manufacturing including costs for direct materials, direct labor, along with variable and fixed overhead, assigning them to the cost of a product.