Which of the Following Illustrates the Concept of External Benefit

question 131

Multiple Choice

Which of the following illustrates the concept of external benefit?

• A) A gardener enjoys his flowers.
• B) Neighbours enjoy a gardener's flowers.
• C) Good weather increases the size of the wheat crop.
• D) A new pesticide increases the size of the wheat crop.

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Definitions:

Variable Costing

A costing method where only variable production costs are included in product costs, with fixed overhead costs treated as period expenses.

Direct Materials

Raw materials that can be directly traced to the manufacturing of a product and are a significant portion of the production cost.

Variable Costing

An accounting method that includes only variable production costs in the cost of goods sold and treats fixed costs as period costs.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.