The Difference Between the Direct and Indirect Methods of Computing

question 125

Multiple Choice

The difference between the direct and indirect methods of computing the cash flow statement occurs in the:

• A) financing activities section.
• B) operating activities section.
• C) investing activities section.
• D) managing activities section.

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Definitions:

Direct Materials

Raw materials that are directly attributable and allocable to a finished product in the manufacturing process.

Direct Labor-Hours

The total hours worked directly on the manufacturing of goods.

Variable Overhead

Costs that fluctuate with changes in production volume, such as utilities and materials, affecting the cost to produce goods or services.

Direct Materials

The raw materials that are directly traceable to the production of a specific product and constitute a significant portion of the product's direct costs.