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Residual income is designed to encourage segment managers to select projects that benefit:

AThe elected chairman
BThe entire company
CThe evening committee
DThe external auditor
Answer & Solution
Correct answer: B. The entire company
1. A manager judged only on their own segment can turn down good projects. 2. Residual income changes what the manager is rewarded for. 3. It incentivizes managers to select projects that benefit the entire company. 4. Rather than only the specific segment they run. _Source: OpenStax Principles of Accounting Volume 2, Managerial Accounting (CC BY-NC-SA 4.0), Ch 9 'Responsibility Accounting and Decentralization', sections 9.1-9.4_
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