If a Mandatory Accounting Change Requires Too Much Work for a Firm

question 40

True/False

If a mandatory accounting change requires too much work for a firm to use the retrospective approach, then the firm can choose to use the prospective approach.

---

Definitions:

Variable Costs

Costs that change in proportion to the level of production or sales volume, such as raw materials and direct labor.

Dollar Contribution Margin

The difference between total sales revenue and total variable costs, expressed in absolute currency terms.

Variable Cost

Costs that change in proportion to the level of production activity or volume, such as raw material costs and direct labor costs.

Fixed Cost

A cost that remains constant, in total, regardless of changes in the level of activity within the relevant range. If a fixed cost is expressed on a per unit basis, it varies inversely with the level of activity.