Suppose the Economy Is in a Recession

question 258

Multiple Choice

Suppose the economy is in a recession. Which of the following is the best incentive scheme for the manager of a large auto sales center?

• A) Threat of termination if one sale is not made each day.
• B) Equal salary for all sales agents regardless of sales.
• C) Bonuses for the sales agents who meet a fixed sales target.
• D) Bonuses for the sales agents with the highest sales relative to other sales agents.

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Definitions:

Standard Cost

A predetermined cost of manufacturing or producing a product or performing a service under normal conditions.

Budget Variance

The difference between the budgeted or projected financial performance and the actual performance.

Fixed Overhead

Costs that do not vary with the level of production or sales, including expenses such as rent, salaries, and insurance.

Control Variance

The difference between expected performance standards and actual performance, used for budget and performance evaluation.