Vertical Equity I

question 70

Multiple Choice

Vertical equity I. means that those taxpayers who have the greatest ability to pay the tax should pay the greatest proportion of the tax. II. means that two similarly situated taxpayers are taxed the same. III. is reflected in the progressive nature of the federal income tax system. exists when Avis, a single individual with 4 dependent children, and Art, a single IV. individual with no dependents, both pay $2,400 income tax on equal $26,000 annual salaries.

• A) Statements III and IV are correct.
• B) Statements II and III are correct.
• C) Statements I and III are correct.
• D) Only statement IV is correct.
• E) Statements I, II, III, and IV are correct.

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Definitions:

Variable Manufacturing Overhead

Costs that vary with the level of production output, such as supplies and indirect labor expenses, not directly tied to the production volume.

Predetermined Overhead Rate

A calculated rate used to allocate overhead costs to products or cost objects based on a planned level of activity.

Direct Labor-Hours

The aggregate number of hours that workers, who are directly part of producing goods or services, contribute.

Job-Order Costing

A cost accounting system that assigns costs to specific production batches or jobs, enabling the calculation of the cost per job.