What Is the Key Distinction Between a Defined Benefit Superannuation

question 7

Multiple Choice

What is the key distinction between a defined benefit superannuation plan and a defined contribution superannuation plan?

• A) A defined benefit plan accumulates funds through investments in real assets such as land and buildings whereas a defined contribution plan accumulates funds through investments in shares and other more liquid assets.
• B) A defined benefit plan is run by professional trustees who seek the support of investment advisors and consultants. A defined contribution plan is normally run by trustees appointed by the employer and focuses on simple formulas for investment.
• C) The assets of a defined benefit plan are the focus in determining the benefits that will be paid out to members, whereas for a defined contribution plan the benefits are measured through the liability to members.
• D) A defined benefit plan's accrued benefits are determined by reference to the provisions of the superannuation plan trust deed's payment formulas. A defined contribution plan's accrued benefits are determined as the difference between the assets and other liabilities of the fund.
• E) None of the given answers.

Understand and identify the differences between investment centers and profit centers.

Calculate investment turnover and understand its implications.

Calculate profit margin and understand its relevance in assessing divisional performance.

Understand the impact of negotiated transfer prices on operating income of divisions and the company as a whole.

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Definitions:

Indirect Materials

Materials used in the production process that cannot be directly traced to a finished product, such as lubricants and adhesives for machinery.

Product Cost

The total expense incurred to produce and deliver a product or service, including materials, labor, and overhead costs.

Period Cost

Costs incurred that do not directly relate to the production of goods, such as sales and administrative expenses.

Salespersons' Commissions

This refers to the payment made to sales staff based on a percentage of the sales they generate, as a form of incentive and reward.