Question

For external reporting purposes, U.S. GAAP, requires companies to report their 10K using the _____________format. However, for internal management reporting, the ________________ format can be used.

a. goodness of fit, contribution margin
b. traditional, contribution margin
c. variable costing, traditional
d. contribution margin, traditional

Answer 1

U.S. GAAP requires external reports to be in the traditional format, while internal reports may use the contribution margin format.

Step-by-step explanation:

For external reporting purposes, U.S. GAAP requires companies to report their 10K using the traditional format. However, for internal management reporting, the contribution margin format can be used. Answering the student's question, the correct option is:b. traditional, contribution margin Accounting profit is the total revenues minus explicit costs, including depreciation. Understanding the difference between traditional and contribution margin reporting formats helps in considering how costs are classified and reported. Traditional accounting, for external reports, includes both variable and fixed costs in the computation of product cost, while contribution margin format, used internally, separates variable costs from fixed costs to compute the contribution margin.