Profit-Sharing Plans

question 97

Multiple Choice

Profit-sharing plans

• A) provide a more direct incentive in small firms than in large firms.
• B) are practically impossible to use successfully in small firms.
• C) are similar to individual incentive plans in their motivational effect.
• D) are an expensive fringe benefit for small firms, costing 40 percent of payroll.

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Definitions:

Physical Units

A measure of product expressed in terms of tangible units, such as pieces or gallons, rather than in monetary value.

Weighted Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the weighted average of all units available for sale.

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, converting them into an amount of fully completed units.

Conversion Activity

The process of transforming raw materials or components into finished goods or services.