Which of the Following Illustrates the Concept of a Negative

question 508

Multiple Choice

Which of the following illustrates the concept of a negative externality?

• A)A college professor plays a vigorous game of racquet ball with the racquet he recently purchased.
• B)A flood wipes out a farmer's corn crop.
• C)A college student plays loud music on his new stereo system at 2:00 a.m.
• D)A janitor eats a hamburger during his lunch break.

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Definitions:

Direct Labor Hours

Direct labor hours represent the total hours worked by employees directly involved in producing goods or providing services in a manufacturing or service setting.

Overhead Costs

Expenses related to the operation of a business that cannot be directly tied to a specific product or service.

Plantwide Overhead Rate

Plantwide overhead rate is a single rate used to allocate all of a plant’s manufacturing overhead costs to its production activities, regardless of the department in which they occur.

Direct Labor Hour

A measure of the labor directly involved in manufacturing a product or delivering a service, often used in costing and budgeting.