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Question 1

Regarding fixed and variable costs, what are Finance's primary concerns?

AFixed costs must be kept to a minimum, but variable costs can fluctuate since they tend to correlate with revenue.

BVariable costs often have a heavier focus than fixed costs, which applies to all areas, including compensation.

CFixed costs and variable costs are equally important and both should be kept to a minimum.

DFixed costs are not a concern because they cannot be changed, so the focus is primarily on variable costs.

Correct Answer: 1

Question 2

Which of the following best describes the most likely perspectives of different groups in the organization that compensation professionals must be aware of?

AInvestors and Finance want to see money spent wisely. Legal must ensure compliance, and HR and operating departments want to see their needs taken into account to attract, retain and motivate a high quality workforce.

BOperating departments and HR understand the company must live within its means and Finance cannot allocate funds to a budget if it is likely that profitability will be adversely affected.

CInvestors want to maximize gains and want to see compensation tightly controlled and Legal needs to ensure that compensation plans do not attract undue scrutiny.

DOperating departments view compensation as it applies to them, HR must balance available resources to attract, retain and motivate employees and Finance knows the value of a motivated workforce and will provide the budget necessary to achieve it.

Correct Answer: 2

Question 3

Your company has had a strong fiscal year with a 15% increase in net income over the prior fiscal year. Share prices are at an all time high. Working with Finance, you have arrived at a 2.5% merit increase budget for the next fiscal year, a smaller increase than the last fiscal year. Finance has indicated that some large capital expenditures will be needed next year, so the company needs to conserve resources. Additionally, Legal is in final negotiations on a lawsuit that may be very costly to the company. Word of the smaller increases has line management concerned that they will lose their best performers. Given all of these factors, what is your best course of action?

AImplement the merit increase budget as is because the anticipated financial obligations have made it necessary

BMeet with Finance and make a case for a larger merit increase budget because the loss of key talent will cost more over the long term than the savings from the smaller merit increases

CGather the perspectives of all stakeholders, analyze their individual concerns and meet to determine whether a compromise solution is possible

DRecommend a reduction in force to eliminate poor performers, which will increase the merit budget by reducing headcount

Correct Answer: 3

Question 4

Regarding fixed and variable costs, what tends to happen as revenue increases?

AVariable costs decrease

BFixed costs decrease

CVariable costs increase and consume a higher percent of revenue

DFixed costs remain the same and consume a lower percent of revenue

Correct Answer: 4

Question 5

Which of the following is the best example of a variable cost?

AAudit fees

BRent

CMaintenance

DShipping

Correct Answer: 5

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