The Choice of the Absorption or Contribution Approach Affects a Firm's

question 38

Multiple Choice

The choice of the absorption or contribution approach affects a firm's contribution margin because:

• A) contribution margin is higher if the contribution approach is used
• B) contribution margin is independent of the approach
• C) contribution margin is lower if the contribution approach is used
• D) None of these answers is correct.

---

Definitions:

Joint Control

Joint control exists in a business arrangement when more than one party has the power to govern the financial and operating policies of an economic activity to benefit from it.

Equal Interest

A situation where all parties or stakeholders hold an identical percentage or stake in an agreement, asset, or entity, ensuring a fair distribution of rights and obligations.

Unanimous Consent

Unanimous consent refers to an agreement or decision made with the approval of all parties involved, often used in corporate governance contexts to expedite decisions without a formal vote.

AASB 11

An Australian accounting standard that addresses the accounting for interests in joint arrangements, specifying how an entity should report its interests.