Which of the Following Are Correct Methods of Computing the Operating

question 62

Multiple Choice

Which of the following are correct methods of computing the operating cash flow of a project assuming that the interest expense is equal to zero?
I.EBIT + Depreciation − Taxes
II.EBIT − Depreciation + Taxes
III.Net Income − Depreciation
IV.[(Sales − Costs) × (1 − Tax rate) ] + [Depreciation × Tax rate]

• A)I and III only
• B)II and IV only
• C)II and III only
• D)I and IV only
• E)I,III,and IV only

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Definitions:

Unit Product Cost

The total cost (both fixed and variable) incurred to produce, store, and sell one unit of a product.

Variable Costing

An accounting method that only considers variable costs for product costing, excluding fixed overheads.

Net Operating Income

Net operating income is the total profit a company generates from its operations, excluding taxes and interest, highlighting operational efficiency.

Absorption Costing

An accounting tactic where the entirety of manufacturing costs—direct materials, direct labor, and manufacturing overhead, both variable and fixed—are included in calculating a product’s cost.