Classify the following into intermediate consumption and final consumption. Also give reasons.
(i) Expenditure on research and development by a company.
(ii) Expenditure on maintenance of machinery by a firm.
(iii) Purchase of uniforms for nurses by a hospital.
Answers
Answer:
Research and development (R&D) expenses are associated directly with the research and development of a company's goods or services and any intellectual property generated in the process. A company generally incurs R&D expenses in the process of finding and creating new products or services
Expenditure on maintenance of an office building is intermediate expenditure. Reason Expenditure on maintenance of an office building will be considered as a raw material, so it should be considered as intermediate expenditure. (ii) Expenditure on improvement of machine in a factory is final expenditure.
Purchase of uniforms for nurses by a hospital is included in the estimation of the national income because the consumption of uniforms is made by the final consumers and it only treated as investment expenditure.
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