When a Pay System Links the Attainment of Certain Goals

question 26

Multiple Choice

When a pay system links the attainment of certain goals or achievements directly to the employee's pay, a _____ is being used.

• A) going rate model
• B) competency-based system
• C) management fit model
• D) skill-based pay system
• E) variable pay system

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Definitions:

Variable Costing

A costing method that only includes variable costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, while fixed costs are expensed in the period they are incurred.

Absorption Costing

An accounting method that includes both variable and fixed manufacturing overhead costs in the cost of a unit of product.

Manufacturing Overhead

All indirect costs related to manufacturing, excluding direct materials and direct labor, such as factory rent, utilities, and equipment depreciation.

Absorption Costing

A method for determining the cost of a product by including all manufacturing expenses, like material costs, labor fees, and both changeable and stationary overheads.