A Contingent Contract Can Create Production Inefficiency; However,many Principals Accept

question 39

Multiple Choice

A contingent contract can create production inefficiency; however,many principals accept this because

• A) inefficiency is inevitable.
• B) monitoring is costless.
• C) risk is reduced.
• D) profit will increase as a result.

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Definitions:

Income Summary

is an account that aggregates all revenue and expenses during an accounting period, used to transfer the net income (or loss) to the capital account.

Freight-in

represents the cost of transporting goods into a business, typically considered as part of the cost of goods sold.

Operating Expense

An expense that a business incurs through its normal business operations, often including items like rent, utilities, and payroll.

Accrual System

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.