In 2016, its first year of operations, Wilber Company reported pretax accounting income of $60,000. Included in the $60,000 was an expense for accrued, unpaid warranty costs of $8,000, which are not deductible until paid for income tax purposes. Wilber's income tax rate was 20%. The entry to record the income tax expense would include a:
A. credit to Income Taxes Payable for $12,000.
B. credit to Income Tax Expense for $12,000.
C. debit to Deferred Tax Asset for $1,600.
D. credit to Deferred Tax Liability for $1,600.
Suppose that the U. S. government decides to charge wine consumers a tax. Before the tax, 40 million bottles of wine were sold every month, at a price of $5 per bottle. After the tax, 34 million bottles of wine are sold every month; consumers pay $6 per bottle (including the tax), and producers receive $2 per bottle. The amount of the tax on a bottle of wine is how much per bottle? Of this amount, the burden that falls on consumers, is how much per bottle, and the burden that falls on producers is how much per bottle? True or False: The effect of the tax, on the quantity sold, would have been smaller, if the tax had been levied on producers.
Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Jordan produces and sells only 7,900 bikes each year. Due to the low volume of activity, Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebars for $37 each; they cost $40 each to make. The following is a detailed breakdown of current production costs. Item Unit Cost Total Unit-level costs Materials $ 17 $ 134,300 Labor 11 86,900 Overhead 3 23,700 Allocated facility-level costs 9 71,100 Total $ 40 $ 316,000 After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $40 each when it can buy them for $37 each. Required:a. Calculate the total relevant cost per unit and total.
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