A Major Benefit of Using a Contribution Ratio Format Is

question 17

Multiple Choice

A major benefit of using a contribution ratio format is that

• A)it supports management's decision on its sales mix.
• B)it assists in determining the effect of sales on operating income.
• C)variable costs are isolated and can be easily reduced.
• D)it shows the impact of fixed costs on the sales mix.

---

Definitions:

Permanent Differences

These are differences between taxable income and accounting income that originate in one period and do not reverse subsequently.

Deferred Tax Asset

A tax relief that results from over-payment or advance payment of taxes, which can be used to reduce a company's future tax liability.

Prepaid Asset

Expenses paid in advance for goods or services to be received in the future, which are recorded as assets until they are used or consumed.

Taxable Income

The amount of income subject to taxes, calculated by adjusting gross income for deductions, exemptions, and allowances, according to tax laws.