In this approach to profitability analysis, the indirect or shared costs are not included in the individual unit analysis:
A) the contribution approach to income statement analysis.
B) the full-cost approach to residual income analysis.
C) return on assets managed approach.
D) the full-cost approach to income statement analysis.
E) the contribution approach to residual income analysis.

Question

Quizplus · Accepted Answer

The contribution approach to income statement analysis only includes direct costs in the unit analysis, leaving out indirect or shared costs. This allows for a clearer analysis of how each unit contributes to the overall profitability of the business.

In This Approach to Profitability Analysis, the Indirect or Shared