The Most Effective Way for an Entity to Take into Account

question 38

Multiple Choice

The most effective way for an entity to take into account the external environmental and the sustainability costs of its activities is:

• A) for the government to issue fines and penalties for breaches
• B) to follow guidelines provided by external parties
• C) by voluntary disclosure
• D) for the entity to internalise the external costs

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Definitions:

Product Costs

Direct and indirect costs associated with producing a product, including materials, labor, and overhead expenses.

Inventoriable Costs

Costs associated with the purchase or production of goods that are considered assets when incurred and expensed as the goods are sold.

Period Costs

Expenses that are not directly tied to the production of goods and are instead allocated to the time period in which they are incurred.

Controllable Costs

Expenses that a manager or business unit has the authority to influence or change in the short term.