Select the Incorrect Statement Regarding the Contribution Margin Income Statement

question 116

Multiple Choice

Select the incorrect statement regarding the contribution margin income statement.

• A) The contribution margin approach for the income statement is unacceptable for external reporting.
• B) Contribution margin represents the amount available to cover product costs and thereafter to provide profit.
• C) The contribution margin approach requires that all costs be classified as fixed or variable.
• D) Assuming no change in fixed costs, a $1 increase in contribution margin will result in a $1 increase in profit.

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Definitions:

Governmental Fund Financial Statements

Financial reports that detail the financial position and results of operations for the governmental funds of a public entity.

Modified Accrual

An accounting method that combines elements of both cash and accrual accounting, recognizing revenues when they become available and measurable and expenses when incurred.

Capital Assets

Long-term assets such as buildings, land, or equipment, which are used in the operations of a business and are not intended for sale in the regular course of business.

CAFR

Comprehensive Annual Financial Report; a set of government financial statements that goes beyond the requirements of generally accepted accounting principles, including details on all funds and activities.