Which of the Following Correctly Describes the Effects of a Decrease

question 201

Multiple Choice

Which of the following correctly describes the effects of a decrease in net taxes?

• A) Disposable income increases, consumption decreases, and saving decreases.
• B) Disposable income increases, consumption increases, and saving increases.
• C) Disposable income decreases, consumption increases, and saving increases.
• D) Disposable income decreases, consumption decreases, and saving decreases.
• E) There is no effect on disposable income, consumption, or saving.

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Definitions:

Labor Efficiency Variance

The difference between the budgeted and actual hours worked, multiplied by the standard labor rate, indicating efficiency in labor usage.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (standard) variable overhead rate multiplied by the actual activity level.

June

The sixth month of the year in the Gregorian calendar, often associated with the start of summer in the northern hemisphere.

Materials Price Variance

A measure of the difference between the actual cost of materials and the standard cost, multiplied by the actual quantity of materials used.