Don Operates a Taxi Business, and This Year One of His

question 89

Multiple Choice

Don operates a taxi business, and this year one of his taxis was damaged in a traffic accident. The taxi was originally purchased for $32,000 and the adjusted basis was $2,000 at the time of the accident. The taxi was repaired at a cost of $2,500 and insurance reimbursed Don $700 of this cost. What is the amount of Don's casualty loss deduction?

• A)$1,300
• B)$2,500
• C)$1,800
• D)$2,000
• E)Don is not eligible for a casualty loss deduction

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Definitions:

Predetermined Overhead Rate

An estimated charge used to allocate manufacturing overhead costs to individual products or job orders based on a predetermined activity base.

Machine-Hours

The total hours that machinery is operational and actively being used in the production process, often used as a basis for allocating manufacturing overhead.

Manufacturing Overhead

A rephrased description: Costs indirectly linked to the production of goods, such as maintenance, factory supplies, and quality control.

Unit Product Cost

The cost to produce a single unit of product, calculated by dividing the total production costs by the number of units produced.