When evaluating short-term special order decisions,which of the following types of income statements should be used?
A) method used for external reporting
B) method that follows U.S. Generally Accepted Accounting Principles
C) absorption approach
D) contribution approach

Question

Quizplus · Accepted Answer

The contribution approach should be used when evaluating short-term special order decisions. This approach separates fixed and variable costs and focuses on the contribution margin, which is the difference between sales revenue and variable costs. Using the contribution approach allows managers to determine the impact on overall profitability of accepting or rejecting a special order, as they can easily calculate the contribution margin per unit and make a decision based on that information.

When Evaluating Short-Term Special Order Decisions,which of the Following Types