Indicate whether each of the following statements about transfer pricing is true or false. Which of the following is an advantage of decentralization?

Multiple Choice

Decentralization motlvates managers to

Improve productivity.

Decentralization encourages lower$-$level

managers to focus on strateglc

decisions.

Authority and responsibility is not clear.

None of these answers are correct.

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.