Contribution Margin Cannot Be Calculated for a Service-Type Business,and Cost-Volume-Profit

question 57

True/False

Contribution margin cannot be calculated for a service-type business,and cost-volume-profit analysis is not applicable for a company that provides services rather than selling goods.

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Definitions:

Acquisition Differential

The difference between the purchase price of an acquired company and the fair value of its net identifiable assets.

Common Shares

Equity securities that represent ownership in a corporation, entitling holders to a share of the corporation's profits through dividends and/or capital appreciation.

Open Market

A freely competitive market where buyers and sellers can transact without restrictions or regulations.

Goodwill

An intangible asset that arises when a business is purchased for more than the fair value of its net tangible assets.