Liabilities That Might Arise from Which of the Following Probably

question 181

Multiple Choice

Liabilities that might arise from which of the following probably would be disclosed only in the notes to the financial statements?

• A) A lawsuit with a reasonably estimable loss
• B) Two year purchase agreement
• C) Possible bankruptcy of an important customer
• D) Estimated income taxes for the current year

---

Definitions:

Variable Manufacturing Costs

Costs that fluctuate with the amount of production output, including expenses like raw materials, direct labor, and other costs that change with production volume.

Fixed Overhead

Costs that do not change with the level of production or sales, including expenses such as rent, salaries, and insurance, which are incurred regardless of business activity levels.

Contribution Margin Ratio

The percentage of sales revenue that exceeds variable costs, indicating the portion contributing to fixed costs and profit.

Selling Price

The amount a customer pays to purchase a product or service from a business.