Why Does the "Dark Side" of Principal-Agent Relationships Exist

question 33

Multiple Choice

Why does the "dark side" of principal-agent relationships exist?

• A)Agents are often not rational.
• B)Institutions sometimes force principal-agent relationships "underground."
• C)Principals often force agents to do things against their will.
• D)The interests of the agent and the principal may not be well aligned.
• E)The principals usually do not know what they are doing.

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Definitions:

Manufacturing Overhead

All indirect costs related to the manufacturing process, including costs of indirect materials, indirect labor, and other expenses that are not directly tied to the production of goods.

Machine-Hours

A measurement unit representing the number of hours a machine is operational and working on production tasks.

Plantwide Predetermined Rate

A single overhead absorption rate calculated for an entire manufacturing facility to allocate overhead costs to products.

Markup

refers to the amount added to the cost price of goods to cover overhead and profit.