Question 1

In compensation plans,a cash bonus:
A)is based on individual or group performance.
B)does not affect long-term pay.
C)is usually triggered when performance exceeds a target.
D)All of the above are correct.

Accepted Answer

A cash bonus can be based on individual or group performance, it does not affect long-term pay, and is usually triggered when performance exceeds a target. Therefore, all of the options provided in the question are correct.

Question 2

Incentive compensation is MOST suited to:
A)all centralized organizations.
B)centralized organizations where the employees are skilled and empowered.
C)all decentralized organizations.
D)decentralized organizations where the employees are skilled and empowered to react to conditions and make decisions.

Accepted Answer

Incentive compensation is best suited for decentralized organizations where skilled and empowered employees can react to conditions and make decisions. This is because incentive compensation is designed to motivate employees to perform at their best by providing incentives for meeting or exceeding performance goals. In a decentralized organization with skilled and empowered employees, incentive compensation can provide a strong motivational tool for driving performance and achieving organizational goals.

Question 3

Group performance should be rewarded with compensation:
A)when an individual's work must be coordinated with others.
B)when employees must coordinate their decision making and other activities with other employees.
C)in addition to individual performance when working in teams.
D)never.

Accepted Answer

The answer of Group performance should be rewarded with compensation:
A)when...

Question 4

Surveys regarding compensation plans in practice suggest that:
A)incentive compensation systems are generally extremely efficient.
B)people believe that incentive compensation plans in the U.S. are increasingly unfair.
C)increased top management incentives generally correlate with greater shareholder wealth.
D)senior executives are paid mediocre salaries for superior performance.

Accepted Answer

Surveys suggest that many people believe incentive compensation plans in the U.S. are increasingly unfair. This is likely due to perceived inequity in distribution, with top executives receiving a disproportionate amount of compensation compared to lower-level employees.

Question 5

Input-based compensation:
A)is considered superior to output-based compensation.
B)requires employees' understanding of company objectives.
C)bases compensation on employees' training and job qualifications.
D)is generally affected by factors beyond employees' control.

Accepted Answer

Input-based compensation is determined by the qualifications and training of the employee, rather than the output or results they produce.

Question 6

A control system in which organizational participants focus on data coming out of the system and ways to deal with it is known as a(n):
A)employee self-control system.
B)diagnostic control system.
C)task and results control system.
D)interactive control system.

Accepted Answer

An interactive control system is a type of control system in which organizational participants focus on data coming out of the system and ways to deal with it. This type of control system is characterized by ongoing communication, collaboration, and feedback among team members. Therefore, option D is the correct answer. The other options do not fully reflect the characteristics of an interactive control system.

Question 7

Intrinsic rewards for compensation:
A)are generally overused.
B)are most effective when they are financial rewards.
C)may have motivational effects greater than extrinsic rewards.
D)require extensive use of management accounting information.

Accepted Answer

Intrinsic rewards, such as recognition and a sense of accomplishment, have been shown to have a stronger motivational effect than extrinsic rewards, such as money or bonuses. Additionally, intrinsic rewards can be more sustainable over time as employees may become accustomed to extrinsic rewards and require increasingly higher rewards for the same level of motivation. Intrinsic rewards do not require extensive use of management accounting information and are not necessarily financial rewards.

Question 8

All of the following are criticisms of stock options used in compensation plans EXCEPT:
A)organizations have been too generous in rewarding stock options.
B)stock options rely on internal measures.
C)stock option's value may reflect many factors beyond the employee's control.
D)the option's price is often too close to the market price at issuance.

Accepted Answer

Stock options rely on external market conditions rather than internal measures, which is why B is not a criticism of stock options in compensation plans.

Question 9

In compensation plans,a stock option is:
A)categorized as a long-term motivational device.
B)usually reserved for employees who affect long-term results.
C)most effective when the exercise price is more than the market price of the stock at issuance.
D)All the above are correct.

Accepted Answer

A) Stock options are categorized as long-term motivational devices because they incentivize employees to work towards the long-term success of the company.
B) Usually, stock options are reserved for employees who affect long-term results, such as executives or managers who have a direct impact on the company's performance.
C) Stock options are most effective when the exercise price (the price at which the employee can buy the shares) is more than the market price of the stock at issuance. This incentivizes the employee to work towards raising the stock price in order to realize a profit when they exercise their options.

Question 10

In compensation plans,profit sharing:
A)is a group incentive compensation plan.
B)is focused on projected long-term performance.
C)must distribute an equal share of the profits to each employee.
D)All of the above are correct.

Accepted Answer

Profit sharing is a group incentive compensation plan, where a portion of the profits earned by the company is distributed among the employees based on a predetermined formula. It is not necessarily focused on projected long-term performance, and it does not have to distribute an equal share of profits to each employee.

Question 11

________ refers to the amount of effort the employee expends on a job or specific task.
A)Direction
B)Persistence
C)Duration
D)Intensity

Accepted Answer

Intensity refers to the level of physical, emotional, and mental energy that an employee puts into their job or task. It can be measured by factors such as the speed and volume of work, level of focus, and enthusiasm displayed.

Question 12

The performance measurement system for employees' compensation should focus on all facets of performance to:
A)ensure that reporting is complete.
B)encourage gaming of the performance indicator.
C)provide the highest possible level of internal control.
D)ensure that employees do not sacrifice performance on unmeasured elements.

Accepted Answer

The purpose of a performance measurement system for employees' compensation is to ensure that employees are fairly compensated based on their level of performance. To achieve this goal, the system should focus on all facets of performance, including both measured and unmeasured elements, to prevent employees from sacrificing performance on unmeasured elements. Focusing solely on complete reporting may encourage employees to manipulate or game the system, while a focus on internal control may not necessarily guarantee fair compensation. Therefore, the best option is to focus on all facets of performance to ensure a fair and accurate performance measurement system.

Question 13

In compensation plans,gain sharing:
A)treats employees as owners and all receive corporate dividends.
B)applies to a group of employees within an organization.
C)is generally based on individual performance.
D)provides feedback on an annual basis.

Accepted Answer

Gain sharing applies to a group of employees within an organization, typically based on the group's performance in achieving specific goals or objectives. It is different from individual performance-based compensation plans. Gain sharing provides feedback on a regular basis, not just annually. While gain sharing can involve treating employees as owners in terms of sharing in the financial benefits of the organization's success, it is not the same as providing corporate dividends.

Question 14

All of the following are examples of extrinsic rewards for compensation EXCEPT:
A)job satisfaction.
B)stock options.
C)a cash bonus.
D)recognition in the company newsletter.

Accepted Answer

Job satisfaction is an intrinsic reward, as it comes from within a person and is not given externally by the organization. The other options (B, C, D) are all forms of extrinsic rewards for compensation, as they are given by the organization to motivate or incentivize employees.

Question 15

The most common incentive compensation plans include all of the following EXCEPT:
A)extrinsic rewards.
B)stock options.
C)profit sharing.
D)employee stock ownership plans.

Accepted Answer

Extrinsic rewards are not a specific type of incentive compensation plan; rather, they are a category of rewards that can include various forms of monetary and non-monetary compensation. Stock options, profit sharing, and employee stock ownership plans are specific types of incentive compensation plans.

Question 16

Extrinsic rewards for compensation:
A)are always motivating.
B)are from another person and reinforce distinguished behavior.
C)result from a feeling of job satisfaction.
D)are always financial.

Accepted Answer

Extrinsic rewards are given by another person to reinforce distinguished behavior, and can take the form of tangible or intangible benefits, such as bonuses, promotions, or awards. They are not always motivating, nor always financial, and do not necessarily result from a feeling of job satisfaction. Choice B is the best option because it accurately describes the nature of extrinsic rewards.

Question 17

________ is a form of earnings management in which expense recognition may be deferred to a future period with the goal of increasing net income in the current period.
A)Gain sharing
B)Smoothing
C)Data falsification
D)Gaming

Accepted Answer

Smoothing involves deferring expense recognition to a future period in order to increase net income in the current period. Gain sharing involves sharing actual gains with employees as a form of incentive. Data falsification and gaming are forms of financial fraud, which are unethical and illegal practices.

Question 18

Stock-related incentive compensation plans include all of the following EXCEPT:
A)stock options.
B)stock appreciation rights.
C)participation units.
D)merit pay.

Accepted Answer

Stock-related incentive compensation plans include stock options, stock appreciation rights, and participation units. Merit pay is a form of compensation based on an employee's job performance and is not directly related to stock ownership or appreciation.

Question 19

Knowledge-based pay for employees is a form of:
A)input-based reward.
B)output-based reward.
C)outcome-based reward.
D)None of the above is correct.

Accepted Answer

Knowledge-based pay is considered an input-based reward because it compensates employees for their skills, knowledge, and abilities rather than for the specific outputs or outcomes they produce.

Question 20

________ refers to the amount of time that an employee will stay with a job or specific task.
A)Persistence
B)Intensity
C)Duration
D)Motivation

Accepted Answer

Persistence refers to the amount of time an employee is willing to continue working on a job or specific task, indicating their commitment and endurance in completing it.

Quiz 9: Behavioral and Organizational Issues in Management Accounting and Control Systems

In compensation plans,a cash bonus:

Incentive compensation is MOST suited to:

Group performance should be rewarded with compensation:

Surveys regarding compensation plans in practice suggest that:

Input-based compensation:

A control system in which organizational participants focus on data coming out of the system and ways to deal with it is known as a(n) :

Intrinsic rewards for compensation:

All of the following are criticisms of stock options used in compensation plans EXCEPT:

In compensation plans,a stock option is:

In compensation plans,profit sharing:

________ refers to the amount of effort the employee expends on a job or specific task.

The performance measurement system for employees' compensation should focus on all facets of performance to:

In compensation plans,gain sharing:

All of the following are examples of extrinsic rewards for compensation EXCEPT:

The most common incentive compensation plans include all of the following EXCEPT:

Extrinsic rewards for compensation:

________ is a form of earnings management in which expense recognition may be deferred to a future period with the goal of increasing net income in the current period.

Stock-related incentive compensation plans include all of the following EXCEPT:

Knowledge-based pay for employees is a form of:

________ refers to the amount of time that an employee will stay with a job or specific task.