While the IRS Will Not Publicize the Precise Factors That

question 37

Multiple Choice

While the IRS will not publicize the precise factors that determine whether a return will or will not be audited, one can deduce that all of the following may be prime targets except

• A)Self-employed persons, especially those in typically high-income businesses
• B)Individuals with high gross income
• C)Taking a deduction that may be easily abused (business use of an automobile, for example)
• D)Activity in sensitive areas, such as salaried government employees, social security recipients, and graduate students on fellowships
• E)All of the above

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Definitions:

Product Cost

The total cost associated with producing or manufacturing a product, including materials, labor, and overhead.

Factory Overhead

All costs related to manufacturing that are not direct materials or direct labor expenses.

Cost Allocation

The process by which factory overhead or other costs are assigned to a cost object, such as a job.

Cost Object

A product, sales territory, department, or activity to which costs are assigned, depending on the decision-making needs of management.