CA Foundation Exam > CA Foundation Questions > Which one leads to Factor Cost?a)Market price...
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Which one leads to Factor Cost?
- a)Market price - Indirect taxes
- b)Market price - Net Indirect tax
- c)Market price +Indirect taxes
- d)Market price + Net Indirect tax
Correct answer is option 'B'. Can you explain this answer?
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Verified Answer
Which one leads to Factor Cost?a)Market price - Indirect taxesb)Market...
Market price - Net Indirect tax = Factor Cost.
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Which one leads to Factor Cost?a)Market price - Indirect taxesb)Market...
Factor cost refers to the actual cost incurred in the production of goods and services. It includes all the expenses related to factors of production such as wages, rent, interest, and profit.
Calculation of Factor Cost:
The factor cost can be calculated by subtracting indirect taxes from the market price of goods and services.
Therefore, the correct option is B, which is Market price - Net Indirect tax.
Explanation:
• Market price refers to the price at which goods and services are sold in the market. It includes the cost of production as well as indirect taxes.
• Indirect taxes are those taxes that are imposed by the government on goods and services, such as sales tax, excise duty, and customs duty.
• Net Indirect tax is the difference between the total indirect taxes paid and the indirect taxes received as input credit.
Hence, to arrive at the factor cost, we need to deduct the net indirect taxes from the market price. This is because indirect taxes are not a part of the cost of production and hence should be excluded while calculating the factor cost.
In conclusion, the formula for calculating Factor Cost is:
Factor Cost = Market Price - Net Indirect Tax
Calculation of Factor Cost:
The factor cost can be calculated by subtracting indirect taxes from the market price of goods and services.
Therefore, the correct option is B, which is Market price - Net Indirect tax.
Explanation:
• Market price refers to the price at which goods and services are sold in the market. It includes the cost of production as well as indirect taxes.
• Indirect taxes are those taxes that are imposed by the government on goods and services, such as sales tax, excise duty, and customs duty.
• Net Indirect tax is the difference between the total indirect taxes paid and the indirect taxes received as input credit.
Hence, to arrive at the factor cost, we need to deduct the net indirect taxes from the market price. This is because indirect taxes are not a part of the cost of production and hence should be excluded while calculating the factor cost.
In conclusion, the formula for calculating Factor Cost is:
Factor Cost = Market Price - Net Indirect Tax
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Community Answer
Which one leads to Factor Cost?a)Market price - Indirect taxesb)Market...
Correct answer is option B .
Market price= Factor cost +Net indirect taxes
Factor cost = Market price - Net Indirect Taxes
As Market Price includes Net Indirect Taxes but Factor Cost excludes it. Factor cost is the actual cost of the product defined whereas Market price is the price at which product is sold in the market.
Market price= Factor cost +Net indirect taxes
Factor cost = Market price - Net Indirect Taxes
As Market Price includes Net Indirect Taxes but Factor Cost excludes it. Factor cost is the actual cost of the product defined whereas Market price is the price at which product is sold in the market.
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Which one leads to Factor Cost?a)Market price - Indirect taxesb)Market price - Net Indirect taxc)Market price +Indirect taxesd)Market price + Net Indirect taxCorrect answer is option 'B'. Can you explain this answer?
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