Which of the Following Statements Is CORRECT

question 30

Multiple Choice

Which of the following statements is CORRECT?

• A) Most businesses (by number and total dollar sales) are organized as partnerships or proprietorships because it is easier to set up and operate in one of these forms rather than as a corporation.However, if the business gets very large, it becomes advantageous to convert to a corporation, mainly because corporations have important tax advantages over proprietorships and partnerships.
• B) Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of U.S.businesses (in terms of number of businesses) are organized as corporations.
• C) Most business (measured by dollar sales) is conducted by corporations in spite of large corporations' often less favorable tax treatment, due to legal considerations related to ownership transfers and limited liability.
• D) Large corporations are taxed more favorably than sole proprietorships.
• E) Corporate stockholders are exposed to unlimited liability.

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Definitions:

Direct Labor Costs

These are the wages paid to workers who are directly involved in manufacturing or producing a product.

Predetermined Overhead Rate

The predetermined overhead rate is a calculated rate used to allocate manufacturing overhead to individual units of production. It is based on estimated costs and expected activity levels.

Fixed Manufacturing Overhead

The portion of the total manufacturing overhead costs that does not vary with the level of production, including costs such as rent, property taxes, and salaries of permanent staff.

Work in Process

Partially completed goods that are still in the production process at the end of an accounting period.