Assume That a Firm Buys All the Parts That It

question 17

Multiple Choice

Assume that a firm buys all the parts that it puts into an automobile for $10,000, pays its workers $10,000 to fabricate the automobile, and sells the automobile for $22,000. In this case, the value added by the automobile company is:

• A) $10,000.
• B) $12,000.
• C) $20,000.
• D) $22,000.

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Definitions:

Inputs

Resources used in the production process, including raw materials, labor, and overhead costs.

Outputs

Outputs are the goods or services produced by a company or an economic system as a result of its inputs and processes.

Controllable Variance

The portion of variance that can be directly managed or influenced by a manager, often related to costs within a specific period.

Variable Overhead

Costs that fluctuate with the level of output or production activity, such as utilities for a manufacturing line.