Question

Include all costs involved in acquiring or making a product. Found on balance sheet refers to:

A) Operating Costs
B) Variable Costs
C) Direct Costs
D) Inventory Costs

Answer 1

Inventory costs, found on the balance sheet, encompass all expenses involved in acquiring or making a product, including both fixed and variable costs, with varying effects on production levels.

Step-by-step explanation:

The costs that include all expenses involved in acquiring or making a product and are found on the balance sheet refer to Inventory Costs. Inventory costs encompass the purchase price of the goods, as well as additional expenses such as shipping, handling, and storage. These costs are both variable and fixed in nature depending on the context. Fixed costs, like rent or the cost of machinery, do not change with the level of production and are considered sunk costs, which should not influence future economic decisions. Conversely, variable costs fluctuate with the level of output and can show diminishing marginal returns, meaning as production increases, the marginal cost of production also rises.