Which of the Following Statements Is FALSE

question 20

Multiple Choice

Which of the following statements is FALSE?

• A)One disadvantage of using leverage is that it does not allow the original owners of the firm to maintain their equity stake.
• B)The separation of ownership and control creates the possibility of management entrenchment;facing little threat of being fired and replaced,managers are free to run the firm in their own best interests.
• C)Managers also have their own personal interests,which may differ from those of both equity holders and debt holders.
• D)The costs of reduced effort and excessive spending on perks are another form of agency cost.

Calculate equivalent units of output and understand the concept in the context of work-in-process and completed production.

Recognize the importance of cost allocation methods and their impact on product pricing.

Identify the role of direct labor hours and machine hours in product costing and overhead allocation.

Understand the principles of absorption costing and how overhead is applied to products.

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