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Alyssa, the financial officer at Doone & Smithfield, encourages the human resource manager to consider using stock options as incentive pay for all employees. The human resource manager cautions that employees could become upset if the options don't turn out to be as valuable as cash. Which statement supports this concern?


A) Stock options are not profitable to employees.
B) Option owners must exercise the options, no matter what the market price.
C) Employees may not purchase their employer's stock.
D) Offering stock options discourages employees from thinking like owners.
E) Stock prices in the market may fall below the exercise price of the options.

F) B) and D)
G) C) and D)

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An organization should keep information, such as changes made to its incentive plan, confidential from its employees.

A) True
B) False

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Piecework rate plans are most suited for


A) innovative tasks.
B) non-standard jobs.
C) managerial jobs.
D) jobs with difficult-to-measure output.
E) routine jobs.

F) None of the above
G) C) and D)

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How does allowing employees to participate in pay-related decisions affect the incentive process?

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Employee participation in pay-related de...

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Standard hour plans are quality-oriented incentives for professional employees.

A) True
B) False

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Incentive pay is specifically designed to energize, direct, or control employees' behavior and is influential because the amount paid is linked to certain predefined behaviors or outcomes.

A) True
B) False

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Wayne Inc., a health insurance company, pays clerks an incentive based on the average amount of work completed per hour. Wayne pays $10 for processing 20 invoices per hour. An employee who processes 30 invoices would earn $15 per hour. Hence, Wayne pays the same rate per invoice no matter how many invoices an employee processes per hour. Which type of incentive pay does this scenario illustrate?


A) straight piecework plan
B) falling differential
C) rising differential
D) standard hour plan
E) straight commission plan

F) B) and C)
G) A) and E)

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Global Development Corp. pays its executives short-term incentives for meeting financial targets. What could be included in this incentive pay?


A) bonus for meeting the return on investment goal for last year
B) bonus for meeting a target for greater customer satisfaction
C) stock options
D) stock purchase plans
E) merit pay

F) A) and B)
G) A) and C)

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Saturn Systems, an information technology company, determines that most problems handled by employees at its help desk can be resolved within 20 minutes. The company sets 20 minutes as the standard time for resolving a customer problem. If an employee solves a customer's problem in less than 20 minutes, the employee still earns 20 minutes' worth of wages. Which payment method does this scenario illustrate?


A) piecework plan
B) differential plan
C) standard hour plan
D) merit pay
E) performance bonus

F) A) and E)
G) A) and D)

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Beyond Space Aeronautics is developing a profit-sharing plan. Ben, the human resource manager, assumes the employees are excited to participate in this start-up company's success. However, a supervisor tells Ben about anxiety surrounding a rumor that employees will lose money if the company has a bad year. How should Ben address this problem with employee morale?


A) by recalling that employees are also motivated by factors other than pay
B) by removing non-management employees from the team designing the incentive plan
C) by conducting meetings to teach about profit sharing and how employees will benefit
D) by reminding employees that rumors are against company policy
E) by shutting down the company's intranet to prevent further spreading of rumors

F) C) and E)
G) B) and D)

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________ refers to incentive pay in which the wage paid is higher when a greater amount is produced.


A) Profit sharing
B) Differential piece rate
C) Gainsharing
D) Scanlon pay
E) Merit pay

F) A) and E)
G) B) and E)

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The human resource, accounting, and legal departments of Glorious Software, a company with locations in seven states plus Europe, are working together on developing a profit-sharing plan. Which option for communicating with employees about the plan would be the most practical and effective?


A) Call a meeting of all the employees to discuss the plan face-to-face.
B) Set up a balanced scorecard to measure opinions about the plan.
C) Ask employees not to engage in rumors.
D) Post descriptions and videos on the company's intranet.
E) Hold off on any communications until all employees can be brought together.

F) C) and D)
G) None of the above

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What is the difference between stock options and an employee stock ownership plan (ESOP) ?


A) Stock options carry significant risk, whereas ESOPs are risk-free.
B) Stock options are usually granted to company executives, whereas ESOPs are provided to all employees.
C) In stock options, stocks are placed into a trust, whereas ESOPs give employees the right to buy a certain number of shares of stock.
D) Under stock options, employees can sell their stocks, whereas ESOPs do not allow employees to sell their stocks.
E) Earnings from stock options are exempt from income taxes, whereas earnings from ESOPs are taxable.

F) C) and D)
G) A) and B)

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The differential piece rate system refers to


A) an incentive pay plan in which the employer pays the rate per piece based on the difference in performance of employees.
B) a system that gives employees a bonus if the ratio of labor costs to the sales value of production is below a set standard.
C) an incentive pay in which the piece rate is higher when a greater amount is produced.
D) a system of linking pay increases to ratings on performance appraisals.
E) an incentive pay plan where employees are paid different wages based on the skills they possess.

F) C) and E)
G) B) and D)

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Employees who receive stock options as incentive pay must exercise the stock options even if the stock price decreases.

A) True
B) False

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What are the advantages and disadvantages of a merit pay system?

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Almost all organizations have establishe...

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What is most likely a consequence of paying most or all of a salesperson's compensation in the form of commissions?


A) It encourages the salesperson to focus on closing the sale.
B) It frees the salesperson to focus on developing customer goodwill.
C) It encourages teamwork over individual performance.
D) It makes the employee appreciate the reward as the reward relates to economic conditions.
E) It will quickly become expensive for the employer.

F) B) and D)
G) A) and B)

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In 2018, a company employee received an option to purchase the company's stock at $45 per share. If the stock is trading at $40 a share in 2020, the employee will most likely


A) exercise the option, receiving a gain of $5.
B) exercise the option, receiving a gain of $40.
C) not bother to exercise the options.
D) buy the stock at $45 per share.
E) sell the shares to a third party slightly above the market price.

F) B) and C)
G) A) and E)

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A balanced scorecard is a combination of performance measures directed toward the company's long- and short-term goals.

A) True
B) False

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What is a disadvantage of a merit pay system?


A) It does not relate the rewards to economic conditions.
B) It cannot be used effectively with performance appraisals.
C) Comparative pay is not considered in its evaluation.
D) It does not provide rewards for performance in all the dimensions measured in the organization's performance management system.
E) It can quickly become expensive for the company.

F) D) and E)
G) All of the above

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