Free Certified Executive Compensation Professional Exam CECP Exam Practice Test

What is a primary objective of profit-sharing and performance-sharing variable pay plans?

• To achieve organizational cost savings through base pay reductions
  
• To increase employee identification with the organization's success
  
• To defer compensation expenses to future reporting periods
  
• To reward individual employees for some significant contribution
  

Step-rate increase programs provide employees the opportunity to receive two regular pay increases at which points?

• At established dates and then every six months thereafter
  
• On January 1 and July 1 of each year
  
• Once when they move a step, and again when the step value changes
  
• At the anniversary date and at the annual merit increase date
  

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?

• Implement the merit increase budget as is because the anticipated financial obligations have made it necessary
  
• Meet 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
  
• Gather the perspectives of all stakeholders, analyze their individual concerns and meet to determine whether a compromise solution is possible
  
• Recommend a reduction in force to eliminate poor performers, which will increase the merit budget by reducing headcount
  

What happens to the marginal cost if revenue accelerates slower than variable costs but fixed costs remain the same?

• It remains the same.
  
• It decreases because variable costs are increasing.
  
• It increases at the same rate as variable costs.
  
• It becomes increasingly higher as revenues increase.
  

Which of the following is the best definition of variable pay?

• Compensation that is given in the form of perquisites such as a company car, fitness membership, paid training, etc.
  
• Compensation that is nondiscretionary and does not vary according to performance or results
  
• Compensation that is contingent on discretion, performance or results
  
• Compensation that is determined by the organization's pay structure
  

Assessment of current and future staffing needs should be based primarily on what?

• Compensation budgets only because staffing cannot exceed the funds available
  
• A combination of organizational goals and budget realities
  
• The consensus of HR management and line management estimates
  
• The opinions of senior leaders in the organization
  

What most accurately describes a reason why organizations use financial reports?

• To differentiate company financial data from industry competitors to prevent loss of proprietary information
  
• To provide subjective information to key constituents that reflects the company's performance in the most favorable manner depending on stakeholder priorities
  
• To create a historical record of financial performance and identify trends that may justify changes in strategy
  
• To promote consistency of communication regarding company performance and value
  

How is the performance review related to pay?

• It isn't. The performance review should not be related to pay decisions.
  
• It is related to the extent that it affects variable pay awards. Base pay is based solely on tenure, prior experience and job skills.
  
• It helps managers meet salary budgets by allowing them to adjust review results to align with available salary increase funds.
  
• It provides managers a measure that can be used along with salary planning guidelines to determine appropriate rewards or consequences.
  

Regarding cost analysis of compensation expense, which job is most likely to incur fixed costs for the company?

• Production worker
  
• Account executive
  
• IT contractor
  
• HR Director
  

Which of the following is the best example of applying business executive to data analysis?

• Compiling data needed to calculate salary budgets and merit increases
  
• Identifying trends and key messages emerging over time
  
• Reviewing historical trends to complete annual budgets
  
• Providing quarterly incentive estimates for accruals