Which of the Following Is a Disadvantage of Profit Sharing

question 43

Multiple Choice

Which of the following is a disadvantage of profit sharing plans?

• A) Employees must trust that management will accurately disclose financial and profit information.
• B) Employees are taxed heavily on the income that they generate from profit sharing plans.
• C) Employees cannot access the funds that they receive from profit sharing plans for up to three years.
• D) Employers get little or no rebate on income tax for choosing profit sharing plans.

---

Definitions:

Actual Costs

The real, specific expenses incurred or required to perform an operation, produce an item, or offer a service.

Standard Costs

Predetermined costs to manufacture a single unit or a number of units during a specific period under current or anticipated operating conditions.

Total Materials Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost, used to evaluate cost control.

Budgeted Units

The quantity of products or services that a company plans to sell or produce within a specific period, as outlined in its budget.