The Variable Cost of Part X Is $50 and the Full

question 84

Multiple Choice

The variable cost of Part X is $50 and the full cost of the part is $80.The part is produced in Country Z and transferred to a plant in Country B.Country Z has a 30% income tax rate.Country B has a 50% income tax rate and an import duty equal to 10% of the price of the item.Part X can be transferred at full cost or variable cost.Assume that Part X is priced at full cost.The income tax effect per unit in country Z is_____.

• A)an increase in tax by $9 per unit
• B)a decrease in tax by $9 per unit
• C)an increase in tax by $24 per unit
• D)a decrease in tax by $24 per unit

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Definitions:

Corporations

Legal entities that are separate from their owners, offering limited liability to shareholders, and having the ability to own property, sue, or be sued.

Cost Principle

An accounting principle that states assets should be recorded at their cost at the time of purchase, not at their current value.

Accounting Records

Documents and records that a business maintains to keep track of its financial transactions, assets, and liabilities.

Market Value

The current price at which an asset or company can be bought or sold in the marketplace.