Contribution-Margin Advocates Argue That

question 35

Multiple Choice

Contribution-margin advocates argue that:

• A) Costs should be distinguished according to where they are incurred
• B) All revenues should be reduced by all fixed and variable costs accrued by the segments earning that revenue
• C) It is misleading to allocate costs arbitrarily
• D) There is no such thing as arbitrary cost allocation
• E) The full-cost approach cannot be used to determine the profitability of a product, territory, or customer

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Definitions:

Consolidation Worksheet

A tool used by accountants to combine the financial statements of a parent company with its subsidiaries, leading to consolidated financial statements.

Intragroup Sales

Intragroup sales involve transactions of goods or services between companies within the same corporate group, impacting consolidated financial statements.

Non-controlling Interest

A shareholder's equity in a portion of a subsidiary that is not owned, directly or indirectly, by the company which owns more than half of the subsidiary.

Consolidated Group

A group of companies composed of a parent and its subsidiaries, whose financial statements are prepared as one entity.