Business Acumen for Compensation Professional Exam
Last exam update: Jul 20 ,2024
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Question 1
What statement is most accurate regarding communication of compensation information?
A. Compensation professionals should anticipate the level of the audience and tailor messages to their needs.
B. Compensation terms and practices are unclear to most individuals who do not work in this area and communication should be tailored to the least informed member of the target audience.
C. The ready availability of information online has made it unnecessary for compensation professionals to tailor messages since individuals can research terms and concepts after the fact if they dont understand a communication.
D. Compensation terms are well-known and easily understood by most stakeholders.
Answer:
A
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Question 2
Regarding fixed and variable costs, what are Finance’s primary concerns?
A. Fixed costs must be kept to a minimum, but variable costs can fluctuate since they tend to correlate with revenue.
B. Variable costs often have a heavier focus than fixed costs, which applies to all areas, including compensation.
C. Fixed costs and variable costs are equally important and both should be kept to a minimum.
D. Fixed costs are not a concern because they cannot be changed, so the focus is primarily on variable costs.
Answer:
B
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Question 3
Which of the following best describes the most likely perspectives of different groups in the organization that compensation professionals must be aware of?
A. Investors 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.
B. Operating 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.
C. Investors want to maximize gains and want to see compensation tightly controlled and Legal needs to ensure that compensation plans do not attract undue scrutiny.
D. Operating 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.
Answer:
A
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Question 4
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?
A. Implement the merit increase budget as is because the anticipated financial obligations have made it necessary
B. 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
C. Gather the perspectives of all stakeholders, analyze their individual concerns and meet to determine whether a compromise solution is possible
D. Recommend a reduction in force to eliminate poor performers, which will increase the merit budget by reducing headcount
Answer:
C
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Question 5
The Delta Company has experienced increased turnover in the past two years. Data from exit interviews indicate that most of those leaving did so for better opportunities and higher compensation. If Delta pays at the highest percentile of the market for their peer group, what data analysis should they do?
A. Additional quantitative analysis to determine whether pay rates are truly competitive or existing data are unreliable
B. Qualitative data collection to talk to key stakeholders and employees and determine whether the exit interviews accurately reflect their concerns
C. Qualitative data collection in the form of an employee survey with questions about employee satisfaction with pay levels
D. No additional data analysis is needed. Delta should increase pay rates based on the existing data to decrease turnover.
Answer:
B
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Question 6
What best describes the primary purpose of budgeting?
A. Limiting spending to a fixed percentage of organizational revenue
B. Making choices about spending based on expectations of performance
C. Increasing profitability of the business annually to maximize shareholder/owner value
D. Complying with local legislation and maintaining accurate records to prepare financial reports and tax documents
Answer:
B
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Question 7
Internal process metrics are most useful in which of the following situations?
A. Assessing how well the business is running
B. Determining employee satisfaction levels
C. Measuring the financial success of the business
D. Evaluating customer perceptions of products or services
Answer:
A
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Question 8
What happens to the marginal cost if revenue accelerates slower than variable costs but fixed costs remain the same?
A. It remains the same.
B. It decreases because variable costs are increasing.
C. It increases at the same rate as variable costs.
D. It becomes increasingly higher as revenues increase.
Answer:
D
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Question 9
If a company has a higher percentage of employees with fixed compensation than variable compensation, what happens as revenues increase?
A. Compensation costs eventually stabilize and become a consistent percent of revenue.
B. Compensation costs and revenue increase at approximately the same rate.
C. Compensation costs eventually decrease as a percent of revenue, increasing profit growth.
D. Compensation costs remain the same as a percent of revenue until variable compensation costs exceed fixed compensation costs.
Answer:
C
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Question 10
Regarding fixed and variable costs, what tends to happen as revenue increases?
A. Variable costs decrease
B. Fixed costs decrease
C. Variable costs increase and consume a higher percent of revenue
D. Fixed costs remain the same and consume a lower percent of revenue
Answer:
D
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Question 11
Which of the following is the best example of a variable cost?
A. Audit fees
B. Rent
C. Maintenance
D. Shipping
Answer:
D
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Question 12
Regarding cost analysis of compensation expense, which job is most likely to incur fixed costs for the company?
A. Production worker
B. Account executive
C. IT contractor
D. HR Director
Answer:
D
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Question 13
Which of the following is the best example of applying business acumen to data analysis?
A. Compiling data needed to calculate salary budgets and merit increases
B. Identifying trends and key messages emerging over time
C. Reviewing historical trends to complete annual budgets
D. Providing quarterly incentive estimates for accruals
Answer:
B
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Question 14
What best describes a use of strategic analysis?
A. Pricing your products appropriately
B. Understanding your business and its competitive strengths and weaknesses
C. Forecasting profit, growth and investment performance to develop realistic budgets
D. Evaluating prior year performance for the narrative portion of annual financial reports
Answer:
B
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Question 15
What is the term for the skills, technologies, applications and practices of continuous iterative exploration and investigation of past business performance used to gain insight and drive business planning?