Which of the Following Statements Is True in the Context

question 35

Multiple Choice

Which of the following statements is true in the context of principal-agent relationships?

• A) The agency relationship is confined to the top management and does not continue down the hierarchy within the company.
• B) Agents almost always have more information about the resources they are managing than the principal does.
• C) Information asymmetry can make it easier for principals to measure how well an agent is performing.
• D) In a principal-agent relationship, the decision making power rests entirely with the principals.
• E) The relationship between the company and the suppliers is an example of a principal-agent relationship.

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Definitions:

Direct Labor

The expenses related to the salaries of workers who are actively engaged in creating products or providing services.

Direct Materials

Raw materials that are directly involved in the production of a product and can be easily traced to it.

Cost Pool

A collection of indirect costs grouped together based on similar cost drivers for the purpose of allocation to products, services, or departments.

Activity-Based Costing

A costing methodology that assigns costs to products and services based on the activities and resources that go into producing them.