Oliver Pays Sales Tax of $7

question 65

Multiple Choice

Oliver pays sales tax of $7.20 on the purchase of a lamp for $120. Michelle paid sales tax of $9 on the purchase of a similar lamp for $150. Oliver's taxable income for the current year is $40,000. Michelle's taxable income is $55,000.
I.The structure of the sales tax is regressive if based on taxable income.
II.The structure of the sales tax is proportional if based on sales price.
III.The structure of the sales tax is progressive based on taxable income.
IV.The average sales tax paid on a purchase equals the marginal tax rate for this tax.
​

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Statements III and IV are correct.
• D)Statements II and IV are correct.
• E)Statements I, II, and IV are correct.

---

Definitions:

Cost Of Goods Available

The total inventory cost that a company can sell during a specific period, including goods purchased or manufactured.

Work-In-Process Inventory

Items in production that are not yet completed, considered a current asset on a company's balance sheet.

Finished Goods Inventory

Products that have completed the manufacturing process and are ready to be sold to customers.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, such as utilities, maintenance, and factory management salaries.