Cost Accounting (15th Edition)
15th Edition
ISBN: 9780133428704
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 23, Problem 23.11Q
“Managers should be rewarded only on the basis of their performance measures. They should be paid no salary.” Do you agree? Explain.
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One of the ways to describe the difference between a manager and nonmanager is that a manager's success is directly dependent on
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both their own and their subordinates' performance.
only their own performance.
more their own than their subordinates' performance.
only their subordinates' performance.
Making managerial pay contingent on measures of managerial and/or firm performance motivates them to deliver good performance for shareholders. However, it also burdens them with greater risks than they may like. How do organizations balance these two considerations when choosing managerial pay and performance measures?
Chapter 23 Solutions
Cost Accounting (15th Edition)
Ch. 23 - Prob. 23.1QCh. 23 - Prob. 23.2QCh. 23 - What factors affecting ROI does the DuPont method...Ch. 23 - RI is not identical to ROI, although both measures...Ch. 23 - Describe EVA.Ch. 23 - Give three definitions of investment used in...Ch. 23 - Distinguish between measuring assets based on...Ch. 23 - Prob. 23.8QCh. 23 - Why is it important to distinguish between the...Ch. 23 - Prob. 23.10Q
Ch. 23 - Managers should be rewarded only on the basis of...Ch. 23 - Explain the role of benchmarking in evaluating...Ch. 23 - Explain the incentive problems that can arise when...Ch. 23 - Prob. 23.14QCh. 23 - Prob. 23.15QCh. 23 - Prob. 23.16ECh. 23 - Prob. 23.17ECh. 23 - Prob. 23.18ECh. 23 - Prob. 23.19ECh. 23 - Prob. 23.20ECh. 23 - Prob. 23.21ECh. 23 - Prob. 23.22ECh. 23 - Prob. 23.23ECh. 23 - Prob. 23.24ECh. 23 - Prob. 23.25ECh. 23 - Prob. 23.26ECh. 23 - Prob. 23.27ECh. 23 - Prob. 23.28PCh. 23 - Prob. 23.29PCh. 23 - Prob. 23.30PCh. 23 - Prob. 23.31PCh. 23 - Prob. 23.32PCh. 23 - Prob. 23.33PCh. 23 - Prob. 23.34PCh. 23 - Prob. 23.35PCh. 23 - Prob. 23.36PCh. 23 - Prob. 23.37P
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- Is there a way to prevent managers from focusing on accounting measures as performance measures?arrow_forwardWhere management's bonuses are tied to profit-based performance measures, management may have an incentive not to revalue assets because?arrow_forwardWhy might a manager exhibit a behavioral tendency to inappropriately consider sunk costs in making a decision?arrow_forward
- Agency theory suggests that one way to motivate managers to act in the best interests of the owners/shareholders is to link managerial compensation to firms' payoffs, such as net income or share returns. However, such a linkage imposes risk on the manager. Required: (1) Why is it important to control or reduce some of the risk thus imposed on managers? Explain. Discuss two methods by which risk imposed on the managers could be reduced.arrow_forwardWhich is not a necessary condition for operating a selected incentive scheme successfully and efficiently? * The rules of the scheme should be easily understandable The bonus payments should be paid soon after the extra effort has been made by the workers. A selected incentive scheme should be communicated to employees. O Labor productivity should be at the very high level.arrow_forwardExplain with an example why managers find it difficult to adopt a decision alternative even when the relevance cost analysis shows the superiority of this decision alternative to maximize operating income over other decision alternatives. What might the company do to reduce the pressure on management and decrease the ethical conflict?arrow_forward
- agency costs may occur if A. Managers make decisions for their own best interest B. Managers may not attempt to maximize the value of the firm to shareholders C. The board does not properly oversee the activities and decisions of managers D.all of the abovearrow_forwardThe reduction in profit arising from the actions of managers being self-serving or possible conflict of interest can best be attributed to.…........….….. • A. Agency cost • B. Tangible expense • C. Agency theory • D. Agency problemarrow_forwardWhy might a manager focused solely on accounting numbers miss opportunities for future benefits?arrow_forward
- Explain and give an example as to how a manager can manipulate the return on investment figure in the short run. Why are these manipulations bad for the company in the long run? Suggest some alternative performance evaluation and compensation schemes.arrow_forwardWhy does the high cost of the system negatively impact the organization's bottom line?arrow_forwardManagers often assume a strictly linear relationship between cost and the level of activity.Under what conditions would this be a valid or invalid assumption?arrow_forward
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