Match Each of the Following Items with the Appropriate Description

question 102

Multiple Choice

Match each of the following items with the appropriate description, indicating whether the item increases or decreases the parent's basis in the stock of a subsidiary.
-Member's operating loss, when stock basis = $0

• A)Increases stock basis of subsidiary
• B)Decreases stock basis of subsidiary
• C)No effect on stock basis of subsidiary

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Definitions:

Contribution Margin

The amount of revenue from sales that exceeds variable costs, indicating how much contributes to covering fixed costs and generating profit.

Fixed Expenses

Costs that remain constant for a given period regardless of the level of production or sales activity, such as rent and management salaries.

Break-Even

The point at which total costs and total revenues are equal, resulting in neither profit nor loss.

Margin of Safety

Margin of safety represents the difference between actual or projected sales and the break-even sales levels, measuring the buffer a company has before it incurs a loss.