Purchases Equal the Invoice Amount

question 41

Multiple Choice

Purchases equal the invoice amount:

• A) Plus freight-in, plus discounts lost.
• B) Less purchase returns, plus purchase allowances.
• C) Plus freight-in, less purchase discounts.
• D) Plus discounts, less purchase returns.

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Definitions:

Sunk Cost

A cost that has already been incurred and cannot be recovered.

Contribution Format

An income statement format that separates fixed and variable costs, showing contribution margin which is sales revenue minus variable costs.

Contribution Margin

The amount by which sales revenue exceeds variable costs of production, indicating how much contributes to covering fixed costs.

Variable Expenses

Costs that vary in proportion to changes in the level of activity or volume of production.