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26. If sales increase, while income and investment remain constant, which of the following is true?

a. Investment turnover decreases.


b. ROS decreases.
c. ROI increases.
d. ROI could increase or decrease.

c 27. Compared to a jewelry store, a supermarket has


a. higher margin and higher turnover.
b. higher margin and lower turnover.
c. lower margin and higher turnover.
d. lower margin and lower turnover.

c 28. If income increases while sales and investment remain constant, which of the following is true?
a. Investment turnover increases.
b. ROS decreases.
c. ROI increases.
d. ROI could increase or decrease.

a 29. Which transfer price is ideal for the company when the selling division is at capacity?
a. Market price.
b. Incremental cost.
c. Budgeted full cost.
d. Actual variable cost plus a percentage profit.

c 30. From the standpoint of the company, the important question in transfer pricing is
a. what is fair to the divisions.
b. how to determine the profit of the divisions.
c. whether or not the transfer should take place.
d. when the transfer should be made.

d 31. The ROI of Division A relative to that of Division B can be influenced by


a. the industry in which each division operates.
b. the transfer price used for sales to Division B.
c. the tax structures of the countries in which the divisions operate.
d. all of the above.

c 32. Considering liabilities in computing divisional investment


a. encourages managers of divisions to pay their bills faster.
b. discourages managers of divisions from acquiring long-term financing.
c. raises divisional ROI above what it would otherwise be.
d. is a bad managerial practice.

d 33. Interdivisional sales


a. lower the company's public image.
b. minimize income taxes.
c. are ignored when computing divisional ROI.
d. do none of the above.

a 34. Which of the following is true about transfer prices for sales between divisions located in different countries?
a. They should consider the tax structures in the two countries.
b. They are usually set by the governments of the two countries.
c. They cannot affect the total income of the company.
d. All of the above.

d 35. Multinational companies face special problems in which of the following areas of managerial practice?
a. Performance evaluation.
b. Transfer prices.
c. Allocating common costs.
d. All of the above.

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