Prorated Allocation of Production-Volume Variance Results in a Higher Operating

question 145

True/False

Prorated allocation of production-volume variance results in a higher operating income for current year than if the entire favorable production-volume variance were credited to Cost of Goods Sold.

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Definitions:

Indirect Method

A cash flow statement preparation approach that adjusts net income for non-cash transactions and changes in working capital to calculate cash flow from operating activities.

Book Value

The net value of a company's assets minus its liabilities, or the net value recorded on the financial statements.

Statement of Cash Flows

An accounting statement illustrating how fluctuations in income and balance sheet accounts influence cash and cash equivalents.

Operating Activities

Business activities directly related to the production and delivery of goods and services, which are reflected in a company's cash flow.