Which of the Following Is Not a Factor That May

question 22

Multiple Choice

Which of the following is not a factor that may lead to "piercing the corporate veil" and imposing liability on corporate owners (shareholders) ?

• A) grossly inadequate capitalization of the corporation
• B) formation of the corporation to avoid personal liability for business obligations
• C) formation of the corporation to perpetuate a fraud or conceal illegality
• D) shareholder diversion of corporate funds or assets

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Definitions:

Job-Order Costing System

An accounting method that assigns costs to specific production batches or jobs, used for customized orders.

Predetermined Overhead Rate

An estimated rate used to apply manufacturing overhead to products or job orders, based on a related activity base such as machine hours or direct labor hours.

Variable Manufacturing Overhead

Costs that vary with the level of production output, such as utilities for machinery, that are associated with the manufacturing process.

Direct Labor-Hours

The measure of the amount of time workers spend directly producing goods or services, important in calculating labor expenses and production efficiency.