If a Company Uses the Indirect Method to Report Cash

question 9

Multiple Choice

If a company uses the indirect method to report cash flows, it

• A) subtracts any increase in its accrued pension cost from net income.
• B) subtracts any increase in accrued pension cost as an investing activity.
• C) adds any increase in its accrued pension cost to net income.
• D) adds any increase in accrued pension cost as a financing activity.

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Definitions:

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or budgeted) cost.

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the standard amount expected to be used, multiplied by the standard cost per unit.

Standard Cost Variances

The differences between the actual costs incurred and the standard costs set for producing a good or service.

Cost Of Goods Sold

The total cost directly associated with producing goods that have been sold, including materials, labor, and manufacturing overhead.