Select the Incorrect Statement Regarding the Contribution Margin Income Statement

question 116

Multiple Choice

Select the incorrect statement regarding the contribution margin income statement.

• A) The contribution margin approach for the income statement is unacceptable for external reporting.
• B) Contribution margin represents the amount available to cover product costs and thereafter to provide profit.
• C) The contribution margin approach requires that all costs be classified as fixed or variable.
• D) Assuming no change in fixed costs, a $1 increase in contribution margin will result in a $1 increase in profit.

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Definitions:

Unaccepted Draft

A written order to pay a certain amount that has not been accepted or honored by the party it is drawn upon.

Transfer Warranty

Guarantees made by the seller regarding the ownership and quality of property being sold, assuring it is free of claims or liens.

Consideration

Something of value exchanged between parties in a contract, which can include money, services, or goods, making the contract legally binding.

Indorsement

A signature or stamp placed on a negotiable instrument (such as a check) that indicates the future control or ownership of the instrument.