The Incentive Principle States That a Person

question 141

Multiple Choice

The Incentive Principle states that a person:

• A)is more likely to take an action if its cost increases.
• B)is more likely to take an action if its benefit increases.
• C)should take an action if its cost increases.
• D)should take an action if its benefit increases.

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Definitions:

Manufacturing Overhead

Costs not directly tied to the production of goods, including rent for factory space and equipment depreciation.

Operating Expenses

These are the costs associated with running the day-to-day operations of a business, excluding the cost of goods sold.

Work In Process

A category of inventory for items that are currently being manufactured but are not yet complete.

Finished Goods Inventory

Refers to the stock of completed products that are ready to be sold but have not yet been sold.