The correct answer is C. $130,000 . A contribution margin income statement separates variable costs from fixed costs , which makes it useful for forecasting profit at different sales levels. OpenStax explains that contribution margin analysis shows how much sales revenue remains after variable costs to cover fixed costs and profit.

First calculate the per-unit amounts based on 10,000 shoes:

Sales per unit = $600,000 / 10,000 = $60

Variable cost per unit = $400,000 / 10,000 = $40

Contribution margin per unit = $20

For 14,000 shoes , total contribution margin would be:

14,000 × $20 = $280,000

Now subtract fixed costs, which stay the same at $150,000 :

Forecasted net income = $280,000 - $150,000 = $130,000

So the company would expect to earn $130,000 if it sells 14,000 shoes. This is exactly why CVP and contribution margin statements are useful for planning: they allow managers to estimate the profit impact of volume changes quickly, as long as selling price, variable cost per unit, and fixed costs remain stable. Therefore, Option C is correct.

The correct answer is B. $126,500 . Under activity-based costing (ABC) , each cost pool gets its own activity rate, and then overhead is applied to the product based on that product’s actual use of each activity. OpenStax and ACCA both describe ABC as assigning overhead through multiple activity pools and cost drivers rather than one broad rate.

First compute the rate for each pool:

Pool 1 rate = $300,000 / 20,000 hours = $15 per hour

Pool 2 rate = $20,000 / 500 pounds = $40 per pound

Pool 3 rate = $10,000 / 100 moves = $100 per move

Now apply those rates to Product B :

Hours: 7,500 × $15 = $112,500

Pounds: 250 × $40 = $10,000

Moves: 40 × $100 = $4,000

Total overhead for Product B = $112,500 + $10,000 + $4,000 = $126,500

Option C, $158,000 , is actually the overhead for Product A, which is a classic trap in this question. Because ABC assigns overhead based on each product’s own activity consumption, Product B’s correct total overhead is $126,500 .

Conservatism — Information related to recognizing losses as they occur

Reliable — Information that can be verified

Material — Information that is important enough to make a difference

Relevant — Information having to do with the matter at hand

These accounting terms describe important qualitative ideas used in financial reporting. Conservatism means accountants should use caution when uncertainty exists, especially by recognizing potential losses sooner rather than delaying them. Reliable information is information that can be supported, confirmed, or verified, which makes it trustworthy for users of financial statements. Material information is significant enough to affect the decisions of investors, creditors, or other users. If leaving it out or misstating it could influence a decision, it is material. Relevant information is information that relates directly to the issue being considered and is useful for decision-making.

These concepts help ensure that accounting information is useful, dependable, and meaningful. Relevance focuses on usefulness, reliability focuses on trustworthiness, materiality focuses on significance, and conservatism focuses on caution under uncertainty. Together, they support better financial statement preparation and interpretation. In this matching question, each term lines up with its most standard accounting definition, so the correct matches are exactly as shown above.