The Variable Cost of Part X Is $50 Per Unit

question 73

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 net savings is ________.

• A)$3 per unit
• B)$6 per unit
• C)$9 per unit
• D)$15 per unit

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Definitions:

Salary Allowances

Fixed amounts over and above basic salaries given to employees to meet specific requirements such as housing, travel, or medical expenses.

Capital Decrease

A reduction in the amount of equity owned by shareholders or owners of a company, often resulting from losses or distribution of dividends.

Salary Allowances

Salary allowances are specific amounts designated in an individual’s salary package for purposes like housing, travel, medical expenses, etc., often with tax implications.

Partnership Income

The earnings generated by a partnership that are distributed to its partners according to their agreement.