If a Company Has a Discontinued Operation Gain of $30,000

question 162

Multiple Choice

If a company has a discontinued operation gain of $30,000 and a 32% tax rate, what is the effect on net income?

• A) Increase of $30,000.
• B) Increase of $20,400.
• C) Increase of $9,600.
• D) No effect.

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Definitions:

Absorption Costing

A cost calculation method in accounting that adds all expenses related to manufacturing—direct materials, direct labor, and both fixed and variable overhead—into the final cost of a product.

Directly Traced

Refers to costs or expenses that can be directly linked to a specific product, service, or department.

Product Costs

Expenses directly incurred from the manufacturing of products, including direct materials, direct labor, and manufacturing overhead.

Manufacturing Margin

The difference between the sales revenue of manufactured goods and the cost of their direct materials and direct labor.