Question

Gauhar has recently completed her fashion designing studies and started a boutique. To produce dresses for sale, she purchased various materials, including a sewing machine, fabric, buttons, and thread. These items are essential for producing the dresses.

Classify the material purchased by Gauhar as Final or Intermediate goods, giving valid reasons in support of the classifications.

Answer 1

Classification of Gauhar’s purchases, which are as follows:

1. Final Goods: Sewing Machine as a capital good and a long-lasting asset that will be used for many production cycles before being thrown away.
2. Intermediate Goods: Stitching, Fabric, and Buttons. These are fully changed during the production process. They lose their individuality and become part of the final dresses. They are included in the price of the finished product; counting them separately would be an extra charge.