Which statement correctly identifies the measurement approaches used for the percentage of completion?

Which statement correctly identifies the measurement approaches used for the percentage of completion?

• A. The Method Uses Only Input Measures
• B. The Method Uses Only Output Measures
• C. The Method Uses Both Input and Output Measures
• D. The Method Uses Neither Input Nor Output Measures

Answer: (C)

The key idea is how progress toward completing a contract is measured under the percentage-of-completion method. Revenue is recognized in proportion to how much of the contract is complete, and that progress can be measured in different ways. You can use input measures, such as costs incurred to date divided by total estimated costs (cost-to-cost), to estimate how far along the project is. You can also use output measures, such as units completed or milestones reached (value of work performed), to gauge progress. Because either approach can provide a reliable indication of progress, the method can employ input-based or output-based measures, depending on which data are most dependable for the contract. That flexibility is why the correct statement is that the measurement uses both input and output measures.

The key idea is how progress toward completing a contract is measured under the percentage-of-completion method. Revenue is recognized in proportion to how much of the contract is complete, and that progress can be measured in different ways. You can use input measures, such as costs incurred to date divided by total estimated costs (cost-to-cost), to estimate how far along the project is. You can also use output measures, such as units completed or milestones reached (value of work performed), to gauge progress. Because either approach can provide a reliable indication of progress, the method can employ input-based or output-based measures, depending on which data are most dependable for the contract. That flexibility is why the correct statement is that the measurement uses both input and output measures.