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Questions and Answers
What are intermediate consumptions primarily used for in a production process?
What are intermediate consumptions primarily used for in a production process?
- To create finished products directly for consumers
- To be transformed into other goods or services (correct)
- To calculate profit margins
- To maintain stock levels of goods
Which of the following is NOT considered an example of intermediate consumption?
Which of the following is NOT considered an example of intermediate consumption?
- Finished products sold to retailers (correct)
- Raw materials used in manufacturing
- Utilities consumed during production
- Services provided by subcontractors
How do intermediate consumptions impact the overall cost of production?
How do intermediate consumptions impact the overall cost of production?
- They stabilize costs across different production cycles
- They are irrelevant to the cost of production
- They increase the overall cost due to their consumption (correct)
- They decrease the overall cost by reducing labor needs
What role do intermediate consumptions play in the value chain?
What role do intermediate consumptions play in the value chain?
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Which factor does NOT affect the level of intermediate consumption in a business?
Which factor does NOT affect the level of intermediate consumption in a business?
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Study Notes
Intermediate Consumption in Production Processes
- Primary Use: Intermediate consumptions are raw materials, semi-finished goods, or services directly used in the production process to create a final product or service.
- Example: A baker uses flour, sugar, and eggs (intermediate consumptions) to produce bread (final product).
- Not Intermediate Consumption: Final goods or services used by consumers are NOT intermediate consumptions. For example, a baker buying a refrigerator for their shop is not considered an intermediate consumption.
Impact on Production Cost
- Direct Influence: Intermediate consumptions directly increase the cost of production. The more raw materials used, the higher the cost.
- Indirect Influence: The cost of intermediate consumptions can influence pricing strategies and overall profitability.
Role in Value Chain
- Value Addition: Intermediate consumptions contribute to the creation of value along the supply chain. They transform raw materials into finished products.
Factors Influencing Intermediate Consumption Levels
- Production Volume: Higher production output leads to more intermediate consumption.
- Technology: Advanced technologies can reduce the need for certain raw materials and thus decrease intermediate consumption.
- Market Demand: Higher demand for final products drives higher intermediate consumption.
- **** **NOT a Factor: **Company size does not directly influence intermediate consumption levels. A small business might use the same amount of raw materials as a large business for a specific product.
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