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Either the Gross Method or Net Method May Be Used

question 188

True/False

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.


Definitions:

Unit Contribution Margin

The difference between the selling price of a unit and its variable costs, indicating how much each unit contributes to covering fixed costs and generating profit.

Sales Volume

The total number of units sold within a specific period, often used as an indicator of business performance.

Variable Expense

Costs that change in proportion to the level of production or sales activity.

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs have been deducted, indicating how much contributes to fixed costs and profits.

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