The CVP Income Statement Classifies Costs

question 10

Multiple Choice

The CVP income statement classifies costs

• A) as variable or fixed and computes contribution margin.
• B) by function and computes a contribution margin.
• C) as variable or fixed and computes gross margin.
• D) by function and computes a gross margin.

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Definitions:

Credit Sales

Sales transactions in which the payment is delayed as agreed by both the seller and the buyer.

Cash Collection

The process of gathering all cash payments received from customers, often related to sales or services, improving a company's liquidity.

Budget Slack

The practice of underestimating revenue or overestimating costs while preparing a budget to create a buffer, which can be used to handle unforeseen financial situations.

Planning

The process of setting goals, determining resources needed to achieve those goals, and outlining the steps necessary to accomplish them.