On a Projected Income Statement, a Business Owner's Target Income

question 138

Multiple Choice

On a projected income statement, a business owner's target income is ________.

• A)the sum of a reasonable salary for the time spent running the business and a normal return on the amount invested in it
• B)the income at which the company's total revenues and its total expenses are equal
• C)the income that will produce a 10 percent return on the owner's financial investment in the business
• D)the income that the owner could earn working for someone else

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Definitions:

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including but not limited to, utilities, depreciation, and salaries of non-direct labor.

Inventoriable Costs

Direct costs associated with the acquisition or production of goods that are capitalized as inventory and recognized as cost of goods sold when the inventory is sold.

Matching Principle

A fundamental accounting concept that requires expenses to be recorded in the same period as the revenues they helped generate.

Percentage-of-Completion

An accounting method that recognizes revenue and expenses of long-term projects as a percentage of work completed during the period.