The Contribution Format Income Statement Is Used as an Internal

question 156

True/False

The contribution format income statement is used as an internal planning and decision-making tool. Its emphasis on cost behavior aids cost-volume-profit analysis, management performance appraisals, and budgeting.

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Definitions:

Labor Quantity Variance

The difference between the actual labor hours used in production and the standard hours expected, multiplied by the standard hourly labor rate.

Direct Labor

The cost of wages for employees who are directly involved in the production of goods or services.

Production Department

The division or area in a manufacturing facility where products are made or assembled.

Materials Price Variance

The difference between the actual cost of materials and the standard cost, multiplied by the quantity purchased.