What Must Occur for Inventoriable Costs to Become Expenses Under

question 56

Multiple Choice

What must occur for inventoriable costs to become expenses under the matching principle?

• A)The product must be completed and ready to sell.
• B)The product must be sold.
• C)All of the costs associated with manufacturing a product must be incurred.
• D)The product must have incurred labour.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product or service, used to cover fixed costs and generate profit.

Fixed Manufacturing Overhead

The set costs associated with operating a manufacturing facility that do not vary with the level of production, including salaries of managers and depreciation of equipment.

Unit Product Cost

The total cost (both fixed and variable) associated with producing a single unit of a product.

Additional Contribution Margin

The increase in contribution margin generated by an additional unit of sales, reflecting the revenue minus variable costs for that unit.