If the target net income is $9600 and the tax rate is 40%, then the target operating income would be ___________?
Correct answer: C. $16,000
- A. $10,000
- B. $12,000
- C. $16,000
- D. $14,000
Explanation
With a 40% tax rate, net income is 60% of operating income, so target operating income is $9,600 ÷ 0.60 = $16,000. Dividing by 40% would incorrectly treat net income as the tax amount.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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