The Primary Reasons for Developing a Conceptual Framework Is To

question 37

Multiple Choice

The primary reasons for developing a conceptual framework is to:

• A) enable regulators to develop accounting standards that are consistent and logically formulated.
• B) provide guidance to accountants in areas where no standard exists.
• C) reduce the number of accounting standards needed.
• D) provide an alternative view to the accounting standards.

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Definitions:

Pretax Income

Income earned by an entity before any taxes have been deducted.

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, reflecting the fixed versus variable cost structure.

Clockworks Co.

A hypothetical or generic name that could be used to refer to a company specializing in mechanical devices, especially those involving gears and timekeeping mechanisms.

Contribution Margin Ratio

The ratio that indicates the percentage of each sale that exceeds the variable costs, calculated by subtracting variable costs from sales revenue and dividing by sales revenue.