Use the information below to answer the following question(s).Urban Body Products Ltd.manufactures body wash liquid soap.The controller has provided the following information and stated that standard costing is used for manufacturing, marketing, and administrative costs. There were no beginning or ending inventories of materials or work-in-process.
-When the distinction between variable and fixed costs is one of the important elements in the preparation of the income statement, the method used should be the
A)capitalization method.
B)contribution margin method.
C)gross margin method.
D)inventoriable method.
E)absorption method.

Question

Use the information below to answer the following question(s).Urban Body Products Ltd.manufactures body wash liquid soap.The controller has provided the following information and stated that standard costing is used for manufacturing, marketing, and administrative costs.   There were no beginning or ending inventories of materials or work-in-process.
-When the distinction between variable and fixed costs is one of the important elements in the preparation of the income statement, the method used should be the
A)capitalization method. 
B)contribution margin method. 
C)gross margin method. 
D)inventoriable method. 
E)absorption method.

Quizplus · Accepted Answer

The question states that the distinction between variable and fixed costs is important in the preparation of the income statement. The method that takes this distinction into account is the contribution margin method, which separates costs into their variable and fixed components and calculates the contribution margin (revenues minus variable costs) to cover fixed costs and generate a profit. Therefore, the best choice is B, the contribution margin method.

Use the Information Below to Answer the Following Question(s)