Hendricks Corporation Sells Widgets in Two States

question 21

Multiple Choice

Hendricks Corporation sells widgets in two states. State A levies a 9% effective tax rate, and State B levies a 3% rate. A and B have adopted sales-factor-only apportionment formulas. To reduce overall multistate income tax liabilities, Hendricks should:

• A) Move its home office from B to A.
• B) Remove all stored inventory from A.
• C) Establish a personal training center in A.
• D) Convert to employee status the independent contractors that it uses to sell widgets in A.

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Definitions:

International Specialization

The economic strategy where countries focus on the production and export of goods and services that they can produce most efficiently.

Full Employment

An economic condition where all available labor resources are being used in the most efficient way possible, typically signifying a very low unemployment rate.

Productive Efficiency

A state where an economy or firm produces goods or services at the lowest possible cost, using all resources effectively.

Production Possibilities Curve

A graph that shows the various combinations of outputs that a society can produce given the available factors of production and technology.