The Following Information Is Reported in the Operating Activities Section

question 155

Multiple Choice

The following information is reported in the operating activities section of Gateway's statement of cash flows for 2014: Which one of the following conclusions can be assumed from the information provided?

• A)Gateway used the direct method to determine cash flows from operating activities.
• B)Gateway purchased more merchandise than it sold in 2014.
• C)Cash payments for merchandise purchases were less than the amount of merchandise purchased on credit during 2014.
• D)Cash payments for merchandise exceeded cost of goods sold by $200,000.

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Definitions:

Marginal Costs

The additional cost incurred by producing one more unit of a product, which can vary as production scales.

Diseconomies of Scale

A situation where an increase in production leads to higher average costs for firms, contrary to economies of scale.

ATC

Average Total Cost, the total cost divided by the quantity of output produced; it's a measure of per-unit production cost.

MC

Short for marginal cost, it represents the change in total cost that arises when the quantity produced is incremented by one unit.