In Accounting for a Long-Term Construction-Type Contract Using the Percentage-Of-Completion

question 5

Multiple Choice

In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year to the

• A) total costs incurred to date.
• B) total estimated cost.
• C) unbilled portion of the contract price.
• D) total contract price.

Calculate the contribution margin ratio and understand its significance in CVP analysis.

Determine the break-even point in units and dollars.

Recognize the impact of changes in cost structures and sales on the break-even point and profitability.

Understand the concept of operating leverage and its effects on profitability.

---

Definitions:

Short Calls

An options trading strategy where an investor sells call options on an underlying asset they do not own.

Option Clearing Corporation

The organization responsible for ensuring the proper settlement of options contracts and mitigating counterparty risk in the options market.

Post Margin

The amount of collateral a participant must deposit with a clearinghouse to cover potential future losses on positions.

Purchased

The act of acquiring ownership of an asset in exchange for payment.