Refer to the Information Provided in Scenario 22

question 79

Multiple Choice

Refer to the information provided in Scenario 22.5 below to answer the question(s) that follow.
SCENARIO 22.5: The tiny nation of Bugaboo consists of two virtually identical islands, Achoo and Zoink, separated by the Strait of Dingo. The islands are similar in geography and population. The only telephone service on the islands is cellular, and the only cellular provider on the islands is the government-owned Bugaboo Communications Company, which charges a standardized rate of 20 Bugabucks per minute. Both islands add on an additional $5 Bugabucks-per-minute usage tax. As a way to increase revenue, the island governor of Zoink decided to increase the usage tax to $10 per minute, effective January 1, 2017. The average monthly cellphone usage per month is listed in the table below.

-Refer to Scenario 22.5. The total cost of telephone service for residents of Achoo in 2017 is ________ Bugabucks.

• A) 5,150
• B) 25,750
• C) 103,000
• D) 128,750

Understand the implications of different revenue recognition methods for tax and financial purposes.

Calculate the income tax expense or benefit associated with operating losses.

Recognize when a valuation allowance for deferred tax assets is necessary.

Understand intraperiod tax allocation and its application to various income components.

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Definitions:

Labor Efficiency Variance

measures the difference between the actual hours worked to produce goods and the standard hours expected, multiplied by the standard labor rate.

Direct Labor-Hours

The hours worked by employees directly involved in the production process.

Variable Overhead Efficiency Variance

A metric that measures the difference between the actual hours taken to produce something and the expected (standard) hours, multiplied by the variable overhead rate per hour.

Standard Machine-Hours

The allocated number of operating hours expected for machinery to achieve a set level of production under standard conditions.