A Contingent Liability Must Be Recognized in the Accounting Records

question 4

Short Answer

A contingent liability must be recognized in the accounting records if it ____________________ and a reasonable estimate of the loss can be made.

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Definitions:

Direct Manufacturing Cost

Expenses directly tied to the production of goods, including materials and labor costs.

Indirect Manufacturing Costs

Expenses related to the production process that cannot be directly traced to individual products, such as utilities or salaries for management.

Contribution Margin

The amount by which a product's sales revenue exceeds its total variable costs, indicating how much contributes to covering fixed costs and generating profit.

Product Costs

The costs directly connected to the creation of a product, including materials, labor, and manufacturing overhead.