The Best Example of an Agency Problem Is

question 25

Multiple Choice

The best example of an agency problem is

• A)an argument between two managers about a late check-out.
• B)lenders disagreeing with hotel owners about dividend payments.
• C)two employees disagreeing about proper table service.
• D)the maintenance manager arguing with the housekeeping manager about an out-of-order room.

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Definitions:

Fixed Expenses

Costs that do not vary with the level of output or sales, such as rent and salaries.

High-low Method

A technique used in accounting and finance to estimate variable and fixed costs based on the highest and lowest levels of activity.

Monthly Fixed Component

The portion of fixed costs, such as rent or salaries, that does not change with the volume of production or sales in a given month.

Lubrication Cost

The expense associated with maintaining machinery through oiling and greasing to ensure smooth operation.