Since Corporate Income Taxes Are Levied on Accounting Profits and Not

question 84

Multiple Choice

Since corporate income taxes are levied on accounting profits and not economic profits,they tend to

• A)favour the accounting profession as it boosts demand of their services.
• B)introduce double taxation as individual shareholders also pay income tax on dividend income.
• C)be efficient since economic profits are hard to assess.
• D)be inefficient since they will affect the allocation of resources.
• E)be inefficient since they fail to contribute substantially to federal revenues.

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Definitions:

Overhead Rates

Ratios used to allocate indirect costs to products or services, based on a predetermined activity base such as labor hours or machine hours.

Machine-Hours

A measure of production time, referring to the total hours that machinery is operated in the manufacturing process.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead to products based on a certain activity base.

Customizing Department

A specialized department in a company that modifies products to meet specific customer requirements or preferences.