The Solow Residual Equals the Percentage Change in Output

question 11

Multiple Choice

The Solow residual equals the percentage change in output:

• A) plus the percentage changes in factor inputs weighted by each factor's share of output.
• B) minus the percentage changes in prices of factor inputs.
• C) minus the percentage changes in factor inputs weighted by each factor's share of output.
• D) plus the percentage changes in each factor's share of output.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much revenue is contributing to cover fixed expenses and profit.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production, such as rent, salaries of permanent staff, and property taxes on a factory.

Variable Costing

A method of accounting that incorporates only the costs that vary with production into the cost of products, leaving out any fixed manufacturing overhead.

Absorption Costing

A fiscal recording method that consolidates every cost involved in manufacturing, which includes the price of direct materials, payments for direct labor, and total overhead costs, whether stable or fluctuating, into the cost allocated to a product.