How Is a Disposal of a Segment of the Business

question 32

Multiple Choice

How is a disposal of a segment of the business reported?

• A) separately stated item on the income statement
• B) balance sheet
• C) statement of cash flows
• D) statement of retained earnings

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Definitions:

Absorption Costing

A cost calculation method in accounting that adds all expenses related to manufacturing—direct materials, direct labor, and both fixed and variable overhead—into the final cost of a product.

Directly Traced

Refers to costs or expenses that can be directly linked to a specific product, service, or department.

Product Costs

Expenses directly incurred from the manufacturing of products, including direct materials, direct labor, and manufacturing overhead.

Manufacturing Margin

The difference between the sales revenue of manufactured goods and the cost of their direct materials and direct labor.