In the Context of Agency Theory, Identify a True Statement

question 47

Multiple Choice

In the context of agency theory, identify a true statement about agents.

• A) They always behave in ways that are consistent with the goals of the owners.
• B) They have less information about the day-to-day business than do principals.
• C) They are less likely than principals to focus on a short time horizon.
• D) They are less likely than principals to take risks when they make decisions.

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Definitions:

ABC System

The Activity-Based Costing system that assigns manufacturing overhead costs to products in a more logical manner by taking into account the specific activities that incur costs.

Activity Cost Pools

Groups of related costs that are associated with particular activities, used in activity-based costing.

Direct Labor Costs

These are wages and benefits paid to employees who are directly involved in the production of goods.

Activity Cost Pools

Groupings of individual costs associated with particular activities, used in activity-based costing to allocate costs more precisely.