Which of the Following Is Not Assumed in Positive Accounting

question 11

Multiple Choice

Which of the following is not assumed in Positive Accounting Theory?

• A) Individuals (including managers) are economically rational in their behaviour.
• B) Individuals (including managers) are primarily motivated by self-interest.
• C) The natural objective of managers is to maximise the wealth of the firm.
• D) Managers are not indifferent in selecting accounting methods to use.

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Definitions:

Direct Labour Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, used to analyze labor cost efficiency.

Direct Labour Efficiency Variance

The difference between the budgeted amount of direct labor hours needed to produce a certain level of output and the actual hours used.

Cost Variances

Cost Variances are the differences between expected costs and actual costs incurred, analyzed in budgeting and accounting to control expenses.

Relative Size

An assessment of an entity's size compared to other entities in the same context, such as a company's market share relative to its competitors.