When Consumption or Production of a Product Has a Harmful

question 49

Multiple Choice

When consumption or production of a product has a harmful side effect that is borne by people not directly involved in the market exchange for that product, the side effect is called a(n) :

• A) marginal cost.
• B) indirect cost.
• C) additional cost.
• D) intrinsic cost.
• E) external cost.

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Definitions:

Process Costing

A costing method used in manufacturing where costs are assigned to batches or production runs, typically suitable for standardized products.

Weighted-Average Method

An inventory costing method that assigns a cost to inventory items based on the weighted average of costs of similar goods available during the period.

Cost Reconciliation

The process of analyzing and adjusting the differences between reported costs and actual costs.

Process Costing

A method of cost accounting used for homogeneous products, where costs are averaged over the units to compute a cost per unit, typically used in industries like chemicals or food processing.