How Might an Employer Reduce the Agency Costs Associated with an Employment

question 2

Multiple Choice

How might an employer reduce the agency costs associated with an employment contract?

• A) Reduce the effort and cost spent in monitoring the employee's work.
• B) Reduce the employee's probation period.
• C) Link the employee's pay to the level of output.
• D) Increase the number of levels in the management hierarchy.

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Definitions:

Selling Expenses

Costs associated with marketing and selling a company's products or services, excluding manufacturing costs.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including costs related to utilities, maintenance, and factory equipment.

Direct Labour Costs

Costs that are directly attributed to the production of goods or services, including wages and salaries of workers who physically produce the items.

Manufacturing Overhead Costs

Expenses related to the production process that are not directly tied to a specific product, including rent, utilities, and salaries of management.