Hi.

Choose the best answer. State your explanation.

1) A bonus plan differs from a salary in terms of:

A) Amount and timing.

B) Base, timing, and financial statement effect.

C) Tax implications.

D) Motivation effects.

E) Base, pool, and payment terms.

2) Of the three basic forms of management compensation (salary, bonus, benefits), the fastest growing part of total compensation is:

A) Salary.

B) Bonus.

C) Benefits.

D) Salary and bonus.

3) As a firm's strategy changes to respond to different stages of a product's life cycle, compensation:

A) Can be affected.

B) Is affected, but only to a very limited extent.

C) Should change in response to the new strategy.

D) Should increase.

E) Should decrease.

4) Risk aversion by managers should be recognized when revising compensation plans because:

A) Compensation mix (salary, bonus) can influence a manager's risk aversion.

B) Most companies want risk averse managers.

C) Most companies want risk taking managers.

D) It costs less to pay risk averse managers.

5) Rules recently established by the Securities and Exchange Commission include a "say on pay" rule that requires:

A) Audit committee review of executive compensation.

B) Nonbinding shareholder votes on executive pay.

C) Compensation committees as a part of corporate boards.

D) Detailed disclosures of executive compensation.

6) Any system of compensation:

A) May encourage unethical behavior.

B) Must be approved by the appropriate regulatory authority.

C) Should be designed by top management.

D) Must be approved by the auditor.

7) The objectives of management compensation, when compared to the objectives used to develop performance measurement systems, are:

A) More numerous.

B) Less specific.

C) Consistent.

D) Significantly broader in scope.

E) More specific.

8) In developing compensation plans, the management accountant works to achieve fairness by making the plan:

A) Precise, comprehensive and directive.

B) Simple, clear and consistent.

C) Attractive.

D) Rewarding.

E) Selective.

9) Bases for management bonus compensation often include:

A) Stock price performance.

B) Percentage of salary.

C) Achievement of break-even sales.

D) Percentage of firm-wide net income.

10) When strategic performance measures or critical success factors are used to determine bonus compensation, the bonus will usually depend either on the amount of improvement in the measure or on:

A) Maintaining the current level.

B) Achieving a predetermined goal.

C) Quality of work completed.

D) Intensity of effort expended.

-ca