Consolidated Statements Are Appropriate When One Corporation Directly or Indirectly

question 32

True/False

Consolidated statements are appropriate when one corporation directly or indirectly owns a majority of the outstanding voting stock of another.

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Definitions:

Variable Cost

Expenses that change in proportion to the activity of a business, such as raw materials and direct labor costs.

Contribution Margin

The remaining amount of revenue after variable costs have been subtracted, indicating how much revenue is contributing to fixed costs and profits.

Incremental Manufacturing Cost

The additional cost incurred to produce an extra unit of output, excluding fixed costs.

Contribution Format

A method of income statement preparation that separates fixed costs from variable costs.