Question

When direct material and direct labor is the limiting factor revenue budgets are usually based on ________.*

A) expected demand of the company's products
B) the capital in the budget period
C) the supply of indirect material and labor in the market
D) maximum units that can be manufacture

Answer 1

The demand for labor is derived from the demand for the firm's output.

Step-by-step explanation:

Economists describe the demand for inputs like labor as a derived demand. Since the demand for labor is MPL*P, it is dependent on the demand for the product the firm is producing. An increase in demand for the firm's product drives up the product's price, which increases the firm's demand for labor. Thus, we derive the demand for labor from the demand for the firm's output.