Multiple Choice
In a company's merit pay program, an individual's compa-ratio represents:
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1. Introduction to Accounting
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Which of the following best describes a cafeteria plan in the context of employee compensation?
A
A plan that offers employees a fixed cash bonus instead of benefits.
B
A plan that requires employees to pay all benefit costs out of pocket.
C
A plan that allows employees to choose fringe benefits from a menu of options.
D
A plan that provides only health insurance to employees.
Verified step by step guidance1
Understand the concept of a cafeteria plan: In financial accounting and employee compensation, a cafeteria plan refers to a benefits program that allows employees to select from a variety of fringe benefits, similar to choosing items from a menu.
Recognize the key feature of a cafeteria plan: Employees have the flexibility to tailor their benefits package to their individual needs, which may include options like health insurance, retirement plans, or childcare assistance.
Compare the provided options: Evaluate each option against the definition of a cafeteria plan. For example, a fixed cash bonus or requiring employees to pay all benefit costs out of pocket does not align with the cafeteria plan concept.
Identify the correct description: The option that states 'A plan that allows employees to choose fringe benefits from a menu of options' matches the definition of a cafeteria plan.
Conclude the analysis: Confirm that the correct answer is the one that aligns with the flexibility and choice inherent in a cafeteria plan, as described in the context of employee compensation.
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