Question 1

Which plan rewards a worker by a premium that equals the percent by which his or her performance is above standard?

Accepted Answer

The differential piece-rate plan rewards workers by providing a premium that is equal to the percent that their performance exceeds the standard rate. This plan motivates workers to exceed the standard rate and also increases their earnings, which can lead to higher productivity and job satisfaction.

Question 2

The chief disadvantage of group plans is that

Accepted Answer

Group plans tie individual rewards to the performance of the group as a whole, which means that workers who may be putting in extra effort may not receive commensurate rewards if the rest of the group is underperforming. This can lead to dissatisfaction and decreased motivation among high-performing workers.

Question 3

To determine eligibility in a short-term incentive program, a job-by-job review is conducted to identify the key jobs (typically of line jobs) that have measurable impact on profitability. This is called the criterion of

Accepted Answer

The criterion being used is identifying key jobs with measurable impact on profitability, which is best described as "key positions". Options A, B, D, and E do not fully capture the idea of identifying specific jobs with measurable impact on profitability.

Question 4

In some long-term incentive plans, shares are awarded without cost to the executive, but forfeited if the executive leaves before a vesting period. What are these plans are called?

Accepted Answer

These plans are called restricted share unit plans. They provide an incentive for executives to stay with the company for a certain amount of time by awarding them shares that will be forfeited if they leave before the vesting period has ended.

Question 5

What is a non-deductible formula as it relates to incentives?

Accepted Answer

The answer of What is a non-deductible formula as it...

Question 6

One drawback to the split-award approach is that it pays too much to a marginal performer. What is one way to get around this problem?

Accepted Answer

The answer of One drawback to the split-award approach is...

Question 7

Under this pay system, each worker receives the minimum hourly wage plus an incentive for each piece produced above a set number of pieces per hour. This system is known as a

Accepted Answer

A guaranteed piecework plan ensures workers receive a minimum wage plus additional incentives for exceeding production targets.

Question 8

Which of the following are criteria to become eligible for a short-term incentive program?

Accepted Answer

The answer of Which of the following are criteria to...

Question 9

For short term incentives, what does the term fund size refer to?

Accepted Answer

Fund size refers to the total amount of bonus money that will be available to be paid out, typically based on the company's performance or productivity gains.

Question 10

What compensation plan offers each person a bonus based on the company's results, regardless of the person's actual effort?

Accepted Answer

Profit sharing is a compensation plan where each person receives a bonus based on the company's results, regardless of their actual effort. This is typically tied to the company's overall profitability, revenue or earnings. Profit sharing encourages all employees to work harder to achieve the company's goals, as everyone benefits from increased profitability.

Question 11

When all employees earning over a threshold amount are automatically eligible for consideration for short-term incentives, what is this called?

Accepted Answer

This is called a salary-level cutoff point, which means that all employees who earn above a certain salary level are eligible for short-term incentives.

Question 12

Which is the most commonly used and oldest type of incentive plan system of pay based on the number of items processed by each individual worker in a unit of time?

Accepted Answer

Piecework plan is the most commonly used and oldest type of incentive plan system where pay is based on the number of items processed by each individual worker in a unit of time.

Question 13

What is the cornerstone of executive compensation?

Accepted Answer

Salary is the cornerstone of executive compensation because it is the base pay that executives receive for their work.

Question 14

A plan in which a production standard is set for a specific work group and its members are paid extra if the group exceeds the production standard, is known as a(n)

Accepted Answer

This type of plan is known as a team or group incentive plan, where the group is rewarded for exceeding a set production standard.

Question 15

Which piecework plan has the most advantages of all the piecework plans?

Accepted Answer

The answer of Which piecework plan has the most advantages...

Question 16

Revlex Inc. has implemented a refinement of the salary cutoff approach to short-term incentive eligibility, which assumes that all managers should be eligible for short-term incentives. What is this called?

Accepted Answer

The refinement of the salary cutoff approach to short-term incentive eligibility is called salary grade, which assumes that all managers should be eligible for short-term incentives based on their salary level.

Question 17

What long-term incentives are most often reserved for senior executives?

Accepted Answer

The answer of What long-term incentives are most often reserved...

Question 18

The right to purchase a specific number of shares of company stock at a specific price during a specified period of time is called a

Accepted Answer

This describes a stock option plan, where an employee is given the option to purchase a specific number of shares at a set price within a certain timeframe.

Question 19

What is the term related to a target bonus that is set for each eligible position and then adjustments are made for greater- or less-than-targeted performance?

Accepted Answer

The answer of What is the term related to a...

Question 20

Under which pay system does each worker receives a set payment for each item produced or processed in a factory or shop?

Accepted Answer

Under a straight piecework plan, workers receive a set payment for each item they produce or process. This system is most commonly used in factories or shops where workers are engaged in repetitive tasks and a high level of output is required. The pay is directly proportional to the amount of work completed, which can act as an incentive for workers to increase their productivity.

Quiz 12: Pay-For-Performance and Financial Incentives