Under the Cost-Recovery Method of Revenue Recognition

question 4

Multiple Choice

Under the cost-recovery method of revenue recognition,

• A) income is recognized on a proportionate basis as the cash is received on the sale of the product.
• B) income is recognized when the cash received from the sale of the product is greater than the cost of the product.
• C) income is recognized immediately after the sale is made.
• D) None of these answers are correct.

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Definitions:

Manufacturing Overhead

All factory-related costs that are incurred during the manufacturing process, excluding direct materials and direct labor.

Factory Depreciation

The systematic allocation of the cost of a manufacturing plant over its useful life.