A contingent asset is a possible asset arising from past asset and the existence of which will be confirmed only by uncertain future events not wholly within the entity's control. An example is a potential recovery on a legal claim with an uncertain outcome. A contingent asset is not recognized but should be disclosed if an inflow of economic benefits is probable. Disclosures include a description of the contingent asset and an estimate of its financial effects. A contingent asset is not recognized because the income may not be realized. However, if realization is virtually certain, the asset is not contingent and may be recognized.

Given that manufacturing overhead is applied on the basis of machine hours, the overhead rate is US $60 per hour $1,800.000 - 30,000) or US $.96 per unit [80 machine hours per batch x $60) - 5,000 units per batch]. Accordingly, the unit full cost is US $6.11 $5.15 unit price cost + $.96). Believing that its traditional cost system may be providing misleading information. an organization is considering an activity-based costing ABC) approach. It now employs a full cost system and has been applying its manufacturing overhead on the basis of machine hours. The organization plans on using 50.000 direct labor hours and 30,000 machine hours in the coming year. The following data show the manufacturing overhead that is budgeted.

Cost, sales, and production data for one of the organization' s products for the coming year are as follows: