The Principal Disadvantage of Using the Percentage-Of-Completion Method of Recognizing

question 9

Multiple Choice

The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it

• A)is unacceptable for income tax purposes.
• B)gives results based upon estimates which may be subject to considerable uncertainty.
• C)is likely to assign a small amount of revenue to a period during which much revenue
• D)none of these.

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Definitions:

Factory Machinery

Refers to the set of equipment and mechanical devices used in a manufacturing plant to produce goods.

Electricity

A form of energy resulting from the existence of charged particles such as electrons or protons, often used as a power source.

Factory Overhead

All indirect costs associated with manufacturing, apart from direct materials and direct labor costs.

Product Cost

The total cost associated with producing goods, including direct materials, direct labor, and manufacturing overhead.