A Traditional GAAP Income Statement Does Not Help Managers Predict

question 54

Multiple Choice

A traditional GAAP income statement does not help managers predict the financial results of their decisions because the format of the statement is based on cost function rather than cost behavior.Which of the following is not classified as a cost behavior?

• A)Product
• B)Fixed
• C)Variable
• D)Fixed and Variable

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Definitions:

Exemption Clause

A contractual term that seeks to limit or exclude one party's liability for certain breaches or scenarios.

Fundamental Breach

A severe violation of a contract that allows the aggrieved party to terminate the agreement and possibly seek damages.

Strict Interpretation

The judicial practice of applying a narrow, literal, and precise reading of legal texts or statutes.

Force Majeure Clause

A contract term anticipating some catastrophic event usually exempting liability when such an event interferes with performance of the contract.