Scenario 20-6 Zooey Is a Single Mother of Two Young Children Whose

question 128

Multiple Choice

Scenario 20-6
Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax system in which
Taxes owed = (1/4 of income) - $15,000.
-Refer to Scenario 20-6. If Zooey decides to quit her job and earns $0 in income annually, how much more or less money will she have compared to continuing to work as a cashier?

• A)If she quits her job, she will have $10,000 less per year.
• B)If she quits her job, she will have $15,000 less per year.
• C)If she quits her job, she will have $10,000 more per year.
• D)If she quits her job, she will have $15,000 more per year.

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Definitions:

Direct Labor-Hours

A measure of the total hours worked directly on manufacturing goods or providing services, used in costing and operational efficiency analysis.

Labor-Related

Pertaining to costs, efforts, or issues directly associated with employees or workforce in the process of producing goods or services.

Activity Rate

The predefined cost-driver rate used in Activity-Based Costing to allocate overhead costs to products or services, based on each activity’s usage by those products or services.

Activity Cost Pool

A collection of overhead costs attributed to particular activities, used in activity-based costing to allocate costs more accurately to products or services.