A key advantage of incentive plans is that they represent variable costs that are linked to the realization of goals as opposed to a fixed cost such as salary that may be largely unrelated to true performance (i.e., output).

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Incentive plans are designed to align employees' actions with company goals by offering rewards based on performance, making them variable costs that directly correlate with the achievement of specific objectives, unlike fixed salaries that do not fluctuate with performance levels.

A Key Advantage of Incentive Plans Is That They Represent