The Contribution-Margin Format of the Income Statement

question 255

Multiple Choice

The contribution-margin format of the income statement:

• A)calculates gross margin.
• B)distinguishes manufacturing costs from nonmanufacturing costs.
• C)is used with absorption costing.
• D)highlights the lump sum of fixed manufacturing costs.

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Definitions:

Allowances

Reductions or adjustments to the carrying amount of assets or the amount of a liability, often related to accounts receivable or inventory to reflect possible uncollectibility or diminution in value.

Deposits in Transit

Deposits in Transit are amounts that have been received and recorded by a business but not yet reflected in its bank statement.

Bank Statement

A summary of financial transactions that have occurred over a period of time in an account held by a person or business with a financial institution.

Cash Account

A financial account that tracks the flow of cash transactions, including receipts and payments, within a company.