Pat Is a Sales Representative for a Publishing Company

question 39

Essay

Pat is a sales representative for a publishing company.He entertains customers as part of his job.During the current year he spends $10,000 on business entertainment.The company reimburses him $5,000.Before consideration of the entertainment costs and the reimbursement,Pat earns AGI of $100,000,and he has itemized deductions of $12,000 due to mortgage interest and taxes.Pat is single,with no dependents.What is Pat's taxable income
a.assuming the employer maintains an accountable plan?
b.assuming the employer does not maintain an accountable plan?

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Definitions:

AVC

Average Variable Cost, the total variable cost divided by the quantity of output produced, representing the variable cost of producing each unit.

Shutdown Point

The level of operation at which a company does not generate enough revenue to cover its variable costs, leading to a decision to cease operations temporarily.

Short-Run Supply Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity that producers are willing to supply in the short term, typically illustrating an upward slope.

Output

The total amount of goods and services produced by an economy, a sector, or a company during a specific period.