Which of the Following Actions Is Consistent with Social Responsibility

question 80

Multiple Choice

Which of the following actions is consistent with social responsibility but is necessarily inconsistent with stockholder wealth maximization?

• A) Investing in a smokestack "scrubber" to reduce the firm's air pollution as mandated by law.
• B) Voluntarily installing expensive machinery to treat effluent discharge which currently is being dumped into a river where it is ruining the drinking water of the community where the plant is located.
• C) Investing in a smokestack filter to reduce sulphur-dioxide emissions in order to reduce the current tax being levied on the firm by the state for its pollution.
• D) Making a large corporate donation to the local community in order to fund a recreation complex that will be used by the community and the firm's employees.
• E) Each of the above actions is consistent with social responsibility and none is necessarily inconsistent with stockholder wealth maximization.

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Definitions:

Materials Cost

The direct and indirect costs associated with the raw materials used in the production of goods.

Equivalent Unit

An Equivalent Unit is a measure used in cost accounting to express the amount of work done on partially finished goods in terms of fully finished goods.

First-In, First-Out Method

An inventory valuation method wherein the goods first added to the inventory are the first ones to be sold, ideal for products with shelf-life concerns.

Conversion Cost

The sum of direct labor and factory overhead costs, representing the expenses necessary to convert raw materials into finished goods.