Final answer:
The two types of losses in accounting for long-term contracts are losses where a business cannot cover variable costs in the short run, and consistent losses in the long run leading to exit from the market.
Step-by-step explanation:
The two types of losses that can become evident in accounting for long-term contracts are losses from not covering variable costs in the short run and the need to exit in the long run due to consistent losses. When a business is facing losses that prevent it from covering its variable costs, it will likely shut down its operations in the short run to prevent further losses. In the long run, if a business continues to suffer from a sustained pattern of losses, it will reduce production and eventually exit the market.
For example, in the case of the hypothetical Yoga Center, if they can't cover their variable costs due to insufficient revenues, they should shut down immediately. However, if they are able to cover their variable costs but not their fixed costs, the firm might remain open in the short run, with the hope that revenues will improve. Nonetheless, if the situation doesn't change, even covering the variable costs won't prevent the necessity to exit in the long run.