Factory support and overhead-not direct labor-represent the biggest costs. But today, product lines and marketing channels have proliferated. The accounting systems they’re using were designed for companies that manufactured a narrow range of products, and for whom materials and direct labor represented the most significant costs. Some companies aren’t even aware that they’re relying on distorted information about their costs, margins, and profits. It does not store any personal data.Meticulously recording all your costs does little good when your accounting framework is outmoded. The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. The cookie is used to store the user consent for the cookies in the category "Performance". This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other. The cookies is used to store the user consent for the cookies in the category "Necessary". The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". The cookie is used to store the user consent for the cookies in the category "Analytics". These cookies ensure basic functionalities and security features of the website, anonymously. Necessary cookies are absolutely essential for the website to function properly. (iv)Real national income (or for that matter GNP) enables us to make a year to year comparison of changes in the volume of output of goods and services. It is useful In finding out the real development capacity of the economy. (iii) National income measured at constant prices truly reflects the real change in physical output of a country whereas national income at current prices does not. However, the same increase in national income at current prices is not an indicator of economic growth. When there is continuous rise in national income at constant prices for a number of years, it means there is economic growth. Since a country is interested in its physical output, it is considered proper and desirable to estimate national income at constant prices because it reflects truly the real change in physical output of a county. It can rise only when there is an increase in the level of physical output because here prices are kept constant or fixed.
(ii) National income at constant prices is affected by only one factor, namely, change in physical output. For example, in 1979-80, India’s national Income at current prices increased by 9.1% but at constant prices it decreased by 5.2%. Consequently, national income at current prices becomes deceptive and fails to reflect the growth in real national output.
If the current prices rise rapidly, national income at current prices will also inflate even if there is no increase in the level of physical output. (i) National income at current prices is affected by two factors, namely, (a) change in prices and (b) change in physical output (amount of goods and services produced). (c) Significance of difference between current prices and constant prices: Evidently, it is change in volume of physical output produced during the year which affects national income at constant prices because prices remain fixed (constant). (In India now 2004-2005 is treated as base year.)įor instance, if goods and services produced during the year 2008-2009 are valued at the prices of the base year [i.e., 2004-2005), it will be called national income at constant prices for the year 2008-2009.
#Current cost basis of measurement free
A base year is a carefully chosen year which is a normal year free from price fluctuations. Constant prices refer to the prices prevailing in the base year. If goods and services produced in a year are valued at fixed prices, i.e., prices of the base year, we get national income at constant prices. National income at constant prices is called real national income whereas national income at current prices is called nominal national income.
0 kommentar(er)
