In Practice,the Cost Minimization Strategy Can Be More Expensive Than

question 104

Multiple Choice

In practice,the cost minimization strategy can be more expensive than the opportunity maximization strategy.
Which of the following is a way in which the cost minimization strategy is less expensive than the opportunity minimization strategy?

• A)the loss of unexpected opportunities
• B)the cost of extensive monitoring mechanisms
• C)the costs of writing detailed contracts
• D)the prevention of opportunistic behavior by the partner(s)

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Definitions:

Direct Cost

A cost that can be easily and conveniently traced to a specified cost object.

Prime Cost

Direct materials cost plus direct labor cost.

Direct Labor

Work done by employees that can be directly traced to the production of goods or services, as opposed to indirect labor involved in support activities.

Direct Materials

The raw materials that are directly traceable to the manufacturing of a product and are an integral part of the finished product.