Answer to Question 1
Answer: Most firms have annual bonus plans aimed at motivating managers' short-term performance. Short-term bonuses can easily result in plus or minus adjustments of 25 or more to total pay. Three factors influence one's bonus: eligibility, fund size, and individual performance. Gainsharing is an incentive plan that engages many or all employees in a common effort to achieve a company's productivity objectives, with any resulting cost-savings gains shared among employees and the company. Popular gainsharing plans include the Scanlon, Lincoln, Rucker, and Improshare plans.
The basic difference among these plans is how employers determine employee bonuses. The Scanlon formula divides payroll expenses by total sales (or, sometimes, by total sales plus increases in inventory). In one version of the Lincoln incentive system, first instituted at the Lincoln Electric Company of Ohio, employees work on a guaranteed piecework basis. The company then distributes total annual profits (less taxes, 6 dividends to stockholders, and a reserve) each year among employees based on their merit rating. Most firms customize their gainsharing plans.
Answer to Question 2
Answer: D
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