Under ASPE, When Work to Be Done and Costs to Be

question 20

Multiple Choice

Under ASPE, when work to be done and costs to be incurred on a long-term contract can be estimated reliably, which of the following methods of revenue recognition is preferable?

• A) instalment method
• B) percentage-of-completion method
• C) completed-contract method
• D) zero-profit method

---

Definitions:

Indirect Labor

Labor costs not directly associated with the manufacture of products or performance of services, such as maintenance and supervision.

Activity Rate

A rate that determines the cost driver of a particular activity, used in activity-based costing to allocate costs to products or services.

Supervising

The act of overseeing and managing employees or processes to ensure that tasks are completed efficiently and effectively.

First Stage Allocations

The initial process in cost accounting of assigning overhead costs to different departments or cost pools.