125.Indicate whether each of the following statements is true or false.Use of residual income to evaluate managers of an investment center may avoid some of the suboptimization that can occur with use...

125.Indicate whether each of the following statements is true or false.


Use of residual income to evaluate managers of an investment center may avoid some of the suboptimization that can occur with use of return on investment as a performance measure.
Residual income is stated as a ratio or percentage.
One disadvantage with residual income as a measure of performance is that it causes smaller divisions to appear to do better than larger divisions.
A balanced score card includes various non-financial performance measures as well as financial performance measures.
The balanced scorecard is a holistic approach to evaluating management and division performance.

126.Indicate whether each of the following statements about transfer pricing is true or false.


When the selling division is currently operating at capacity, goods should not be transferred to other divisions within a company.
A transfer price is the price used in making sales between divisions or other segments in a company.
Most companies use a market-based price as the basis for setting transfer prices.
The lower the transfer price is, the higher the profit for the purchasing division.
The level of the transfer price affects the reported profits of the selling division and the purchasing division, as well as the company as a whole.

127.Indicate whether each of the following statements about transfer pricing is true or false.


A cost-based transfer price has the advantage of promoting efficiency and fairness.
A market-based transfer price may be adjusted to take into account cost savings that occur as a result of sales being made within the company.
A decentralized company should adopt a policy of requiring divisions in the company to make sales to other divisions when such sales will benefit the company as a whole.
The level of capacity at which the selling division is operating should not affect the level of the transfer price for a sale to another division in the same company.
Companies with operations in two or more countries sometimes try to set transfer prices at a level that will reduce their overall income tax bill.