The Variable Cost of Part X Is $50 Per Unit

question 20

Multiple Choice

The variable cost of Part X is $50 per unit and the full cost of the part is $80 per unit.The part is produced in Country Z and transferred to a plant in Country B.Country Z has a 30% income tax rate.Country B has a 50% income tax rate and an import duty equal to 10% of the price of the item.Part X can be transferred at full cost or variable cost.Assume Part X is transferred at full cost.By using full cost instead of variable cost for the transfer price,the income tax effect per unit in Country Z is ________.

• A)a decrease in tax by $9 per unit
• B)an increase in tax by $9 per unit
• C)a decrease in tax by $24 per unit
• D)an increase in tax by $24 per unit

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Definitions:

Silver

A lustrous white metal with the highest electrical conductivity of any element and the highest thermal conductivity of any metal.

Atomic Symbol

A one or two-letter abbreviation derived from the element's name in English or Latin, representing a chemical element in the periodic table.

Ag

Known as silver, it is a chemical element with the symbol Ag and atomic number 47, often used in jewelry, electronics, and silverware.

Lead

A heavy metal with the symbol Pb and atomic number 82, known for its malleability, resistance to corrosion, and toxicity.