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Student name:__________
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.
1) The percentage of companies using some form of variable pay is declining because many
employees prefer base wages.
⊚ true
⊚ false
2) Merit pay can be given in the form of lump-sum payments or as increments to the base
pay.
⊚ true
⊚ false
3) Merit pay decreases fixed compensation costs over time.
⊚ true
⊚ false
4) In the long run, merit bonuses cost employers less than merit pay.
⊚ true
⊚ false
5) All incentive plans share an established standard against which worker performance is
compared to determine the magnitude of the incentive pay.
⊚ true
⊚ false
6) Standard hour plans are better for nonrepetitive jobs requiring numerous skills for
completion.
⊚ true
⊚ false
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7) A fast and efficient worker would earn more money under the Rowan plan than under the
Halsey 50–50 plan.
⊚ true
⊚ false
8) The Rowan plan uses a standard that is purposely set high, requiring high performance
levels.
⊚ true
⊚ false
9) Employees working under individual incentive plans tend to resist the introduction of
new technology.
⊚ true
⊚ false
10) Individual incentives yield higher productivity gains than group incentives.
⊚ true
⊚ false
11) The free-rider problem is common in firms using individual incentive plans.
⊚ true
⊚ false
12) Unions prefer individual incentive pay plans to group incentive pay plans since members
can earn more money.
⊚ true
⊚ false
13) A group performance–based pay plan is superior to an individual plan when production
methods and labor mix must change to meet changing pressures.
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⊚ true
⊚ false
14) Gain-sharing plans do not use a historical standard to set productivity standards since
environmental conditions can change quickly.
⊚ true
⊚ false
15) An individual incentive plan should be used when a supervisor is viewed as biased and
performance standards are not readily apparent.
⊚ true
⊚ false
16) Scanlon plans are designed to lower labor costs by lowering the level of a firm’s activity.
⊚ true
⊚ false
17) An advantage of a group incentive plan is that it leads to increased line-of-sight.
⊚ true
⊚ false
18) Many variable pay plans have some form of profit trigger linked to revenue growth or
profit margins
⊚ true
⊚ false
19) Performance plans typically feature corporate performance objectives for a time three
years in the future.
⊚ true
⊚ false
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20) A combination plan often favored by chief executive officers who don’t like to make
payouts when the company loses money is a completely self-funding plan.
⊚ true
⊚ false
21) The percentage of companies using some form of variable pay is declining because many
employees prefer base wages.
⊚ true
⊚ false
22) Merit pay can be given in the form of lump-sum payments or as increments to the base
pay.
⊚ true
⊚ false
23) Merit pay decreases fixed compensation costs over time.
⊚ true
⊚ false
24) In the long run, merit bonuses cost employers less than merit pay.
⊚ true
⊚ false
25) All incentive plans share an established standard against which worker performance is
compared to determine the magnitude of the incentive pay.
⊚ true
⊚ false
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26) Standard hour plans are better for nonrepetitive jobs requiring numerous skills for
completion.
⊚ true
⊚ false
27) A fast and efficient worker would earn more money under the Rowan plan than under the
Halsey 50–50 plan.
⊚ true
⊚ false
28) The Rowan plan uses a standard that is purposely set high, requiring high performance
levels.
⊚ true
⊚ false
29) Employees working under individual incentive plans tend to resist the introduction of
new technology.
⊚ true
⊚ false
30) Individual incentives yield higher productivity gains than group incentives.
⊚ true
⊚ false
31) The free-rider problem is common in firms using individual incentive plans.
⊚ true
⊚ false
32) Unions prefer individual incentive pay plans to group incentive pay plans since members
can earn more money.
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⊚ true
⊚ false
33) A group performance–based pay plan is superior to an individual plan when production
methods and labor mix must change to meet changing pressures.
⊚ true
⊚ false
34) Gain-sharing plans do not use a historical standard to set productivity standards since
environmental conditions can change quickly.
⊚ true
⊚ false
35) An individual incentive plan should be used when a supervisor is viewed as biased and
performance standards are not readily apparent.
⊚ true
⊚ false
36) Scanlon plans are designed to lower labor costs by lowering the level of a firm’s activity.
⊚ true
⊚ false
37) An advantage of a group incentive plan is that it leads to increased line-of-sight.
⊚ true
⊚ false
38) Many variable pay plans have some form of profit trigger linked to revenue growth or
profit margins
⊚ true
⊚ false
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39) Performance plans typically feature corporate performance objectives for a time three
years in the future.
⊚ true
⊚ false
40) A combination plan often favored by chief executive officers who don’t like to make
payouts when the company loses money is a completely self-funding plan.
⊚ true
⊚ false
MULTIPLE CHOICE – Choose the one alternative that best completes the statement or
answers the question.
41) Which of the following is a reward that recognizes outstanding past performance?
A) Insurance
B) An allowance
C) A remittance
D) Merit pay
42) Which of the following statements is true of merit pay?
A) Merit pay differentials based on performance are usually large enough to motivate
performance.
B) Merit pay decreases fixed compensation costs over time.
C) Merit pay is inexpensive even when too many high-performance ratings are awarded.
D) Merit programs are commonly designed to pay different amounts depending on the
level of performance.
43) Which of the following statements is true of the Halsey 50–50 method?
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A) It derives its name from the shared split between worker and employer of any
savings in direct cost.
B) In this method, a worker’s bonus increases as the time required to complete a task
decreases.
C) In this method, the standard time for a task is purposely set at a level requiring high
effort to complete.
D) It is usually offered to top managers and professionals to get them to focus on long-
term organization objectives.
44) Which of the following is true of merit bonuses?
A) They are viewed as less of an entitlement than merit pay.
B) They are more expensive than merit pay in the long run.
C) Cost-conscious firms avoid using merit bonuses.
D) Employees receive merit bonuses that build into base pay.
45) Which of the following statements is true of individual spot awards?
A) They are an example of long-term incentives.
B) They are more expensive than merit pay increases.
C) They are given to employees for exceptional performance as an add-on bonus.
D) They are given to all employees as a one-time cost-of-living adjustment.
46) Which of the following statements is true of the Rowan plan?
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A) It an individual incentive plan that motivates top managers and professionals to focus
on long-term organization objectives.
B) In this plan, the standard time for a task is purposely set at a level requiring high
effort to complete.
C) It is an individual incentive plan that provides for variable incentives as a function of
a standard expressed as time period per unit of production.
D) In this plan, a worker’s bonus remains constant irrespective of the time required to
complete a task.
47) One common feature of all types of incentive plans is:
A) an established standard of performance that is used to determine the magnitude of the
incentive pay.
B) a sharing contract between the employees and employers, which stipulates that the
losses incurred by the companies will be shared by both employees and employers.
C) an established formula that specifies the maximum percentage of base pay allocated
as incentives.
D) a risk-sharing plan that increases pay depending upon the turnover rate of a
company.
48) Which of the following is an individual incentive plan?
A) A balanced scorecard system
B) A stock ownership plan
C) A gain-sharing plan
D) A straight piecework system
49) Paying a dime for every bottle collected and turned to a collection center is an example
of:
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A) a standard hour plan.
B) the Merrick system.
C) a straight piecework system.
D) the Rowan plan.
50) The most frequently implemented incentive system is:
A) a standard hour plan.
B) a straight piecework system.
C) the Merrick system.
D) the Taylor differential piece-rate plan.
51) ________ requires division of a task into simple actions and determination of the time
required by an average skilled worker to complete each action.
A) A standard hour plan
B) The Rowan plan
C) A Bedeaux plan
D) The Merrick plan
52) An incentive system with three piecework rates is the
A) Taylor plan.
B) Gantt plan.
C) Rowan plan.
D) Merrick plan.
53) If you had repair work done on your car, the shop most likely used ________ to pay the
mechanic.
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A) a Bedeaux plan
B) a standard hour plan
C) the Halsey 50–50 method
D) a straight piecework plan
54) For any task completed in standard time or less, earnings are pegged at 120 percent of the
time saved under the
A) Merrick plan.
B) Gantt plan.
C) Taylor plan.
D) Rowan plan.
55) Menthorp, Inc. wants to design a variable pay plan that fosters teamwork and increases
the business knowledge of its employees. In order to ensure maximum motivation, Menthorp
wants its variable pay plan to show a clear performance-reward link. Which of the following
plans is most suitable for Menthorp?
A) A gain-sharing plan
B) The Rowan plan
C) A stock ownership plan
D) The Merrick plan
56) TreeDen Corp. experiences an increase in its employee turnover rate. Upon investigating,
it discovers that employees are dissatisfied with the company’s pay. Employees cannot see a
direct link between their performance and their pay. They are also unhappy about having to pay
out of their pockets to obtain grants. In this case, TreeDen is most likely using a
A) stock ownership plan.
B) cash profit-sharing plan.
C) gain-sharing plan.
D) team incentive plan.
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57) Maxwell Construction Corp. employs a lot of uneducated laborers. The company wants
to introduce a variable pay plan that is easy to understand and does not cost much to administer.
Which of the following variable pay plans is Maxwell most likely to introduce?
A) A balanced scorecard plan
B) A gain-sharing plan
C) A stock ownership plan
D) A cash profit-sharing plan
58) Which of the following is the most commonly used team incentive performance
standard?
A) Quality of goods
B) Productivity improvements
C) Financial performance
D) Quality of services
59) Horizon Inc. wants its employees to focus on organizational as well as individual goals. It
also wants to motivate its employees to contribute toward increasing the company’s shareholder
value. It has implemented a variable pay plan that links incentive payouts to the company’s
financial targets. Horizon believes that this plan would help it clearly communicate its priorities
to its employees. However, the downside of this plan is that the employees receive reduced
payouts if the company’s financial targets are not fulfilled. Which of the following variable pay
plans is Horizon most likely using?
A) The Rowan plan
B) A balanced scorecard plan
C) A stock ownership plan
D) The Merrick plan
60) Which of the following is an advantage of providing stock ownership as variable pay to
employees?
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A) It reinforces team identity.
B) It is the simplest type of variable pay plan.
C) It defers a portion of taxes to employees.
D) It provides a direct pay-performance link.
61) ________ have indirect pay–performance links and require employees to put up money to
exercise grants.
A) Bedeaux plans
B) Balanced scorecard plans
C) Stock options plans
D) Merit pay plans
62) Which of the following is an advantage of gain-sharing plans?
A) They are the simplest type of variable pay plan.
B) They prevent payouts if a company’s financial performance is poor.
C) They are administratively easy to implement.
D) They increase employees’ knowledge of business.
63) Which of the following is a disadvantage of gain-sharing plans?
A) Payouts can occur even if a company’s financial performance is poor.
B) Pay-performance links are indirect.
C) Employees are required to put up money to exercise grants.
D) Mandatory stock ownership required by gain-sharing plans can increase turnover
rates.
64) Which of the following is an advantage of team incentives?
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A) They are effective in stimulating ideas and problem solving.
B) They are administratively easy to implement.
C) They can easily set equitable targets for all teams.
D) They are effective in isolating the impact of a team.
65) Which of the following is a disadvantage of team incentives?
A) They fail to reflect how work is performed.
B) They maximize distinctions between team members.
C) They are ineffective in stimulating ideas and problem solving.
D) They are administratively complex to implement.
66) A team leader with a free-rider problem in his team can most likely maximize the
performance of his team by:
A) instructing the team to do their best.
B) specifying performance levels and due dates.
C) assigning tasks only to the top performers in the team.
D) punishing free riders who fail to meet standards.
67) In gain-sharing plan formulas,
A) productivity measures are in the numerator and revenues are in the denominator.
B) productivity measures are in the numerator and labor inputs are in the denominator.
C) costs are in the numerator and revenues are in the denominator.
D) labor inputs are in the numerator and productivity outcomes are in the denominator.
68) Components identified as vital to the success of both Scanlon and Rucker plans are:
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A) top management support and primary focus on wage incentives.
B) a flexible payout formula and low turnover rates.
C) union and top management support.
D) a productivity norm and effective worker committees.
69) Which of the following are an example of a long-term incentive plan?
A) Merit bonuses
B) Performance plans
C) Bedeaux plans
D) Spot awards
70) The trend in recent variable-pay design is to combine the best of
A) individual and group incentive plans.
B) gain-sharing and profit-sharing plans.
C) the Halsey and Rowan plans.
D) balanced scorecard and cash profit-sharing plans.
71) Which of the following is a reward that recognizes outstanding past performance?
A) Insurance
B) An allowance
C) A remittance
D) Merit pay
72) Which of the following statements is true of merit pay?
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A) Merit pay differentials based on performance are usually large enough to motivate
performance.
B) Merit pay decreases fixed compensation costs over time.
C) Merit pay is inexpensive even when too many high-performance ratings are awarded.
D) Merit programs are commonly designed to pay different amounts depending on the
level of performance.
73) Which of the following statements is true of the Halsey 50–50 method?
A) It derives its name from the shared split between worker and employer of any
savings in direct cost.
B) In this method, a worker’s bonus increases as the time required to complete a task
decreases.
C) In this method, the standard time for a task is purposely set at a level requiring high
effort to complete.
D) It is usually offered to top managers and professionals to get them to focus on long-
term organization objectives.
74) Which of the following is true of merit bonuses?
A) They are viewed as less of an entitlement than merit pay.
B) They are more expensive than merit pay in the long run.
C) Cost-conscious firms avoid using merit bonuses.
D) Employees receive merit bonuses that build into base pay.
75) Which of the following statements is true of individual spot awards?
A) They are an example of long-term incentives.
B) They are more expensive than merit pay increases.
C) They are given to employees for exceptional performance as an add-on bonus.
D) They are given to all employees as a one-time cost-of-living adjustment.