Which of the Following Is an Example of an Externality

question 300

Multiple Choice

Which of the following is an example of an externality?

• A) Annie purchases a handbag.
• B) Bob's dog barks loudly during the night waking his neighbors.
• C) Clark sells a book to Calvin.
• D) David watches a scary movie.

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Definitions:

Inventories

Assets held for sale, or in the process of being produced for sale, or to be used in the production process.

Overapplied Manufacturing Overhead

This occurs when the allocated manufacturing overhead cost is more than the actual manufacturing overhead costs incurred.

Underapplied Manufacturing Overhead

This occurs when the allocated manufacturing overhead costs are less than the actual overhead costs incurred, leading to a cost variance.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including both material and labor costs.