What Is a Major Problem with Profit-Sharing Plans

question 68

Multiple Choice

What is a major problem with profit-sharing plans?

• A) They increase the fixed costs of organizations.
• B) The line of sight between employee performance and organizational profits is blurred.
• C) The profits distributed to employees can be too much.
• D) There is no agreed upon procedure to determine profits.

Recognize the need for accurate cost allocation methods to ensure reliable product and service costing.

Understand the significance of inventory accounts in a manufacturing business and their impact on financial reporting.

Learn how job order costing aids in performance evaluation and decision-making through trend analysis and cost control.

Understand how to calculate and interpret overapplied or underapplied overhead.

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Definitions:

Division's Margin

The difference between the sales generated by a division and its direct costs, used to evaluate the profitability of the division.

Division's Turnover

The total sales or revenue generated by a specific department or division within a company during a given period.

Minimum Required Return

The minimum rate of return that an investor expects to achieve from an investment, considering its risk level.

Delivery Cycle Time

The total time taken from the receipt of a customer order to the delivery of the product, indicating the efficiency of the order fulfillment process.