A Negative Cash Conversion Cycle

question 259

Multiple Choice

A negative cash conversion cycle

• A) indicates that the firm is shortening its average payment period and lengthening its average collection period.
• B) means that the operating cycle exceeds the average payment period.
• C) means that the average payment period exceeds the operating cycle.
• D) is easy for a manufacturing firm to attain.

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Definitions:

Work in Process

Inventory items that are in the process of being produced but are not yet completed.

Underapplied Overhead

The situation where the allocated manufacturing overhead costs are less than the actual overhead costs incurred, leading to undercosted products.

Predetermined Overhead Rate

A calculation used in cost accounting to allocate overhead costs to products or job orders based on a set formula before the period begins.

Direct Labour-hours

The total number of labor hours spent directly on the production of goods or services.