In the Case of a Coal-Burning Plant That Generates Pollutants

question 102

Multiple Choice

In the case of a coal-burning plant that generates pollutants:

• A) the firm would consider the cost of this pollution in its production decisions even in the absence of regulation.
• B) consumers are faced with prices that reflect the full cost of production.
• C) government agencies may seek to limit the emission of pollution through regulation.
• D) the people who buy the output of the plant have to pay the costs of pollution abatement.

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Definitions:

Overhead

The indirect costs or expenses associated with operating a business, including administrative, office, and rented space expenses.

Materials Ledger

A record of the quantity and value of materials on hand, received, and issued during a period.

Subsidiary Ledger

A detailed ledger that supplements a general ledger by providing detailed information for individual accounts, such as accounts payable or receivable.

Overapplied Overhead

A situation where the allocated manufacturing overhead cost for a period exceeds the actual overhead costs incurred, leading to a favorable variance.