Which of the Following Should Be Done When Developing a Compensation

question 95

Multiple Choice

Which of the following should be done when developing a compensation plan for a family business?

• A) Make sure that family values set the tone.
• B) Consider fair compensation to be equal compensation for all family members
• C) Make sure to compensate wives for the work they do
• D) Compensate family members at a higher rate than nonfamily members
• E) Include emotional pressures as a decision making factor

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Definitions:

Absorption Costing

A bookkeeping strategy that encompasses all production expenses, including direct materials, direct labor, and variable plus fixed overhead, into the pricing of a product.

Variable Costing

An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs and treats fixed overhead expenses as period costs.

Variable Costing Income

An accounting method that considers only variable costs—costs that vary with production—when determining cost of goods sold and, ultimately, income.

Fixed Overhead Cost

Indirect fixed costs associated with the production process, such as rent and insurance, that do not vary with the level of output.