The Starting Point for Preparing the Operating Activities Section Using

question 180

Multiple Choice

The starting point for preparing the operating activities section using the indirect method is:

• A)current assets.
• B)current liabilities.
• C)net income.
• D)ending cash balance.

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Definitions:

Variable Costing

A pricing approach that incorporates only those production expenses that vary—such as direct materials, direct labor, and variable manufacturing overhead—into the cost of products.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a unit of product.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding production costs but including items like rent, utilities, and payroll.

Net Income

The total profit of a company after all expenses, including taxes, cost of goods sold, and operating expenses, have been deducted from total revenue.