Which of the Following Statements About Ordinary Income and Capital

question 26

Multiple Choice

Which of the following statements about ordinary income and capital gain is true?

• A) Income characterized as capital gain can have no additional tax characteristics.
• B) Individuals pay tax on their capital gains at a preferential the same rate as ordinary income.
• C) Corporations pay tax on both ordinary income at their regular rate and capital gain at their regular a preferential rate.
• D) Individuals pay tax on their capital gains at a preferential rate and corporations pay tax on both ordinary income and capital gain at their regular rate.

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Definitions:

Absorption Costing

A cost accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - in the cost of a product.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed overhead.

Production Cost

The total expense incurred in manufacturing a product, including raw materials, labor, and overheads.

Unit Costs

The cost incurred to produce, store, and sell one unit of a product, including direct materials, labor, and overhead expenses.