Which of the Following Statements Is True About the Relationship

question 288

Multiple Choice

Which of the following statements is true about the relationship among external, internal and social costs?

• A) External cost is the difference between social and internal costs.
• B) Internal cost is the sum of social and external costs.
• C) Social cost is the difference between internal and external costs.
• D) None of the above.

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Definitions:

Direct Materials

The raw materials that are directly used in the manufacturing process of a product.

Manufacturing Overhead

The indirect factory-related costs incurred when producing a product, including costs associated with maintenance, utilities, and salaries of supervisory personnel.

Direct Labor Costs

Expenses associated with employees who directly contribute to the manufacturing or production of goods in a company.

Annual Overhead Costs

The total expenses not directly tied to a product or service's production, incurred over a year, such as rent, utilities, and insurance.