11) Team incentives encourage cooperation by

A) forcing people to work together on difficult tasks.

B) changing management style.

C) letting individuals help one another as they strive toward a common goal.

D) rewarding all teams members by the same amount.

E) rewarding team members individually.

12) Which type of compensation is most prevalent when a satisfactory performance measure cannot be designed?

A) dividends

B) stock options

C) salary

D) bonus based on ROI

E) bonus based on ROI and/or RI

13) Endicott Inc. has four divisions. Each division produces and sells a variety of industrial products. The company is developing a compensation plan for division managers. Three options are being considered: (a) salary, (b) performance based incentive using RI, (c) mix of salary and a performance based incentive using RI. What factors should be considered in designing this plan?

14) Bob Cellular Phone uses ROI to measure divisional performance. Annual ROI calculations for each division have traditionally employed the ending amount of invested capital along with annual operating income and net revenue. The DuPont method is generally used. The company's Phone Accessories Division had the following results:

a.Discuss some factors that may have contributed to the decrease in ROI for the current year.

b.Assume 'total assets employed' are 10% less than total assets. What is the effect of using 'total assets employed' when calculating ROI?

a.While sales increased by 25 percent, net income only increased by 20 percent. This may indicate that expenses increased more than they should have. Apparently the expected marginal net income from the new investment was $1,150,000 ($5,000,000 0.23), and either sales were too low or expenses high for the new products. Start-up costs may have also contributed to the increased expenses of the first year's operations.

b.Total assets employed, = $10,000,000 90% = $9,000,000

15) Broughton Industries Ltd. is a publicly traded company and is organized into divisions. The company currently has a stock option plan for its head office executives only and it now is considering establishing an incentive program for its divisional managers. The proposal is to create a bonus pool based on a predetermined percentage of corporate net income after taxes. Divisional managers will be eligible for money from the bonus pool based on achievement of divisional return on investment (ROI). The calculation of the divisional ROI will be based on divisional net income (including an allocation of head office charges) and investment is defined as total assets.