Which of the Following Is True About Outcome-Oriented Principal-Agent Contracts

question 17

Multiple Choice

Which of the following is true about outcome-oriented principal-agent contracts?

• A)The principal must monitor with little cost what the agent has done.
• B)When profits drop, agent's compensation goes up.
• C)Agents do not demand compensating wage differentials in such contracts.
• D)Agents face minimal risks in such contracts.
• E)The interests of the company and employees are aligned in such contracts.

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Definitions:

LIFO

Last In, First Out (LIFO) is an inventory valuation method which assumes that the most recently produced items are the first to be sold.

Units

In accounting and finance, refers to a measure of quantity or volume of production or inventory.

Specific Identification

An inventory costing method in which costs are assigned to individual items or batches of items, not to inventory as a whole.

Cost of Goods Sold

This refers to the aggregate expense involved in creating a product that a company sells, including direct labor, material costs, and direct factory overhead.