Income Is Considered to Have Been Earned When

question 19

Multiple Choice

Income is considered to have been earned when:

• A) it is probable that any income owing will be received and any outstanding expenses, such as warranty claims, can be identified.
• B) the activities necessary to generate the income are substantially complete.
• C) the amount of income generated can be reliably measured.
• D) all of the above.

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Definitions:

Prime Costs

The direct costs of manufacturing a product, which include direct materials and direct labor.

Conversion Costs

The costs incurred when converting raw materials into finished products, typically including direct labor and manufacturing overhead.

Production Labor Wages

The total amount of compensation paid to employees directly involved in the production of goods or services.

Direct Cost

Costs that can be directly attributed to the production of a specific good or service, such as raw materials and labor directly involved in manufacturing.