The Presence of Negative Externalities That Are Incorporated in Price

question 109

True/False

The presence of negative externalities that are incorporated in price, results in misallocation of resources.

---

Definitions:

Direct Materials Purchased

Raw materials bought that are directly used in the manufacturing of products.

Variable Manuf. Overhead

Costs that vary with the level of production, such as indirect materials and utilities used in manufacturing.

Variable Overhead Spending Variance

The difference between actual variable overhead costs and the budgeted costs for the actual level of activity, indicating overspending or underspending.

Labour Efficiency Variance

The difference between the budgeted labor hours or costs and the actual labor hours or costs incurred.