The Average Tax Rate of a Taxpayer Is Only Likely

question 146

Multiple Choice

The average tax rate of a taxpayer is only likely to equal the marginal tax rate when the taxpayer:

• A)collects a government salary
• B)has a very high income
• C)has a very low income
• D)is a middle-income earner

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Definitions:

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Absorption Costing

An accounting method that includes all manufacturing costs, both fixed and variable, in the cost of a product.

Variable Costing

A costing method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

Excess Capacity

The amount by which the actual production of a company exceeds its planned production capacity.