Which of the Following Statements Is Correct

question 65

Multiple Choice

Which of the following statements is correct?

• A)contribution margin contributes to profits.
• B)contribution margin contributes to fixed costs.
• C)contribution margin contributes to variable costs.
• D)Both A and B.

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Definitions:

Percentage-Of-Completion Method

An accounting method used to recognize revenue and expenses of long-term contracts as a percentage of work completed during the period.

Completed Contract Method

The Completed Contract Method is an accounting approach where revenue and expenses of a contract are recorded only when the contract is completed.

Construction In Progress

An accounting term for the total cost incurred for constructing long-term, physical, non-current assets that are not yet completed at the end of a company’s accounting period.

Fixed Contract

An agreement with terms that set specific prices, conditions, and timeframes, not subject to change.