Bonus plans should be tied to variable cost income, which is less subject to manipulation because is not affected by inventory level changes, rather than the conventional:

Multiple Choice

• Marginal cost income.

• Operating income.

• Full cost income.

• Tax-based net income.

A method for determining a bonus based upon the performance of the firm is a(n):

Multiple Choice

• Unit-based pool.

• Activity-based pool.

• Segment-based pool.

• Volume-based pool.

• Firm-based pool.

The stock option form of bonus payments to managers usually:

Multiple Choice

• Is not consistent with shareholder interests.

• Focuses on the short-term.

• Can lose some motivation because of the delay in reward.

• Has less risk than other types of bonus payment plans.

• Motivates well even in extended market downturns.