Brighton,Inc

question 30

Multiple Choice

Brighton,Inc.uses the indirect method to determine its net cash flows from operating activities.During the course of the year,the company's Accounts Receivable increased by $10,000 and its Accounts Payable decreased by $5,000.If these are the only two adjustments required to convert net income to net cash provided by operating activities,the combined effect will be a(n) :

• A) subtraction of $5,000.
• B) addition of $5,000.
• C) addition of $15,000.
• D) subtraction of $15,000.

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Definitions:

Direct Materials

The raw materials that can be physically and directly associated with manufacturing the end product.

Factory Overhead

All indirect costs associated with the production process, such as salaries for supervisors and costs for utilities, not directly attributed to specific units of products.

Mixed Cost

A cost that contains both variable and fixed cost elements, making it partially dependent on the level of output or activity.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent or salaries.