The Variable Cost of Part X Is $50 Per Unit

question 32

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 Portugal and transferred to a plant in the United States.Portugal has a 10% income tax rate.The United States 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 Portugal is ________.

• A) a decrease in tax by $3 per unit
• B) an increase in tax by $3 per unit
• C) a decrease in tax by $15 per unit
• D) an increase in tax by $15 per unit

---

Definitions:

Accounting Policies

The specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting financial statements.

AASB 6

Refers to the Australian Accounting Standards Board standard that deals with the exploration for and evaluation of mineral resources.

AASB 6

Exploration for and Evaluation of Mineral Resources, an Australian standard that governs the financial reporting of exploration and evaluation expenditures in the mining sector.

Exploration Phase

The period in the development of a mining, oil, or gas project focused on discovering and determining the size and quality of a mineral or hydrocarbon deposit.