Question 1

Tanner's employer puts a predetermined portion of profits into a trust account for Tanner's retirement.Which of the following is most likely the type of profit-sharing plan used by Tanner's employer?

Accepted Answer

A)With deferred profit-sharing plans,the employer puts cash awards into trust accounts for the employees' retirement.Here the employer generally distributes the awards based on a percentage of the employee's salary,or some measure of the employee's contribution to company profits.

Question 2

The employees at DataMax participate in a profit-sharing plan.DataMax distributes 15% of its profits as profit shares to employees at regular intervals.Which of the following is most likely used at DataMax?

Accepted Answer

A)There are several types of profit-sharing plans.With current profit-sharing or cash plans,employees share in a portion of the employer's profits quarterly or annually.In cash plans,the firm simply distributes a percentage of profits (usually 15% to 20%)as profit shares to employees at regular intervals.

Question 3

When developing the involvement system for a gainsharing plan,which of the following is NOT a commonly used element?

Accepted Answer

B)Developing the involvement system is the seventh step in implementing a gainsharing plan.The most commonly used elements include steering committees,update meetings,suggestion systems,and problem-solving teams.Employee mediations are not used.

Question 4

Elaine,the HR manager at Western Enterprises,has been assigned the task of implementing a gainsharing plan.What does Elaine most likely need to do first?

Accepted Answer

C)The first step in implementing a gainsharing plan is to establish general plan objectives like lowering labor costs.The second step is choosing specific performance measures.

Question 5

All of the following are advantages of team incentive plans EXCEPT that ________.

Accepted Answer

B)The benefits of team incentive plans include reduced jealousy and increased team planning,problem solving,and collaboration.The primary problem relates to inequity in financial compensation because everyone is paid equally but does not work equally.

Question 6

Which of the following best explains identity in regards to the Scanlon plan?

Accepted Answer

B)One feature of the Scanlon plan is identity.Identity means that in order to focus employee involvement,the company must articulate its mission or purpose,and employees must understand how the business operates in terms of customers,prices,and costs.

Question 7

Jack is in the process of implementing a gainsharing plan for his firm.He has already determined that the plan's objectives will be to lower labor costs.What is the next step that Jack needs to take?

Accepted Answer

A)After establishing general plan objectives,Jack needs to choose specific performance measures.Choosing a funding formula,deciding the frequency of bonuses,and determining the payment form are additional steps in the process.

Question 8

When hired by Delmar Designs,Shane agreed to forego 6% of his normal pay if he didn't meet his goals in return for a 12% bonus if he exceeded his goals.In which type of plan does Shane most likely participate?

Accepted Answer

A)At-risk variable pay plans are plans that put some portion of the employee's weekly,monthly,or yearly pay at risk.If employees meet or exceed their goals,they earn back not only the portion of their pay that was at risk,but also an incentive.If they fail to meet their goals,they forego some of the pay they would normally earn.

Question 9

Tyler Oil offers a profit-sharing plan to its employees.Each year,Tyler Oil distributes total annual profits less taxes among employees based on employee merit ratings.Which of the following is most likely used by Tyler Oil?

Accepted Answer

B)In one version of the Lincoln incentive system,first instituted at the Lincoln Electric Company of Ohio,employees work on a guaranteed piecework basis.The company distributes total annual profits (less taxes,6% dividends to stockholders,and a reserve)each year among employees based on their merit rating.

Question 10

Competence in the Scanlon plan refers to a focus on ________.

Accepted Answer

C)Competence is a third basic feature of the Scanlon plan.The program,say three experts,"explicitly recognizes that a Scanlon plan demands a high level of competence from employees at all levels." This suggests careful selection and training.

Question 11

The Scanlon plan is an early version of a ________ plan,an incentive plan that engages employees in a common effort to achieve productivity objectives.

Accepted Answer

C)The Scanlon plan is one early version of a gainsharing plan.Gainsharing is an incentive plan that engages many or all employees in a common effort to achieve a company's productivity objectives,with any resulting cost-savings gains shared among employees and the company.

Question 12

Which term refers to payments companies make in connection with a change in ownership or control of a company?

Accepted Answer

B)Golden parachutes are extraordinary payments companies make to executives in connection with a change in ownership or control of a company.For example,a company's golden parachute clause might state that,with a change in ownership of the firm,the executive would receive a one-time payment of two million dollars.

Question 13

With which of the following can an executive NOT profit until the stock makes significant gains?

Accepted Answer

D)With premium priced options,the exercise price is higher than the stock's closing price on the date of the grant,so the executive can't profit from the options until the stock makes significant gains.

Question 14

With a ________,an executive receives units instead of shares of company stock.In the future,the executive receives cash equal to the appreciation of the units owned.

Accepted Answer

C)Under phantom stock plans,executives receive not shares but "units" that are similar to shares of company stock.Then at some future time,they receive value (usually in cash)equal to the appreciation of the "phantom" stock they own.

Question 15

Which of the following is NOT a type of gainsharing plan?

Accepted Answer

D)In addition to the Scanlon plan,other popular gainsharing plans include the Lincoln,Rucker,and Improshare plans.Roth is not a type of gainsharing plan.

Question 16

Which incentive plan is based on a philosophy that managers and employees must cooperate together?

Accepted Answer

B)The Scanlon plan is based on a philosophy of cooperation.This philosophy assumes that managers and workers must rid themselves of the "us" and "them" attitudes that normally inhibit employees from developing a sense of ownership in the company.

Question 17

The Lincoln incentive system is an incentive plan that ________.

Accepted Answer

D)In one version of the Lincoln incentive system,first instituted at the Lincoln Electric Company of Ohio,employees work on a guaranteed piecework basis.The company distributes total annual profits each year among employees based on their merit rating.

Question 18

Which profit-sharing plan provides tax advantages for employees by postponing income taxes,often until the employee retires?

Accepted Answer

C)With deferred profit-sharing plans,the employer puts cash awards into trust accounts for the employees' retirement.Here the employer generally distributes the awards based on a percentage of the employee's salary,or some measure of the employee's contribution to company profits.There is a tax advantage,since employees' income taxes on the distributions are deferred,often until the employee retires.

Question 19

The Scanlon plan includes all of the following features EXCEPT ________.

Accepted Answer

D)The five features of the Scanlon plan include a philosophy of cooperation,identity,competence,an involvement system,and a sharing of benefits formula.The plan does not call for focusing on individual achievement.

Question 20

Gainsharing is an incentive plan that ________.

Accepted Answer

B)Gainsharing is an incentive plan that engages many or all employees in a common effort to achieve a company's productivity objectives,with any resulting cost-savings gains shared among employees and the company.

Quiz 12: Pay for Performance and Financial Incentives