What Happens When Moving from Net Income to Cash Flows

question 61

Multiple Choice

What happens when moving from net income to cash flows as the result of an increase in inventory balances?

• A) Cash flows increase.
• B) Cash flows decrease.
• C) Cash flows are unchanged.
• D)The change in cash flows cannot be determined.

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Definitions:

Standard Costs

Predetermined costs assigned to goods and services, used as benchmarks to measure performance by comparing them with actual costs.

Factory Overhead

The sum of all indirect costs of manufacturing, including expenses related to the operation of factories such as utilities and rent, articulated with different phrasing.

Predetermined Rate

A rate established in advance to apply overhead costs to products or job orders, usually based on estimated costs and activity levels.

Standard Cost Tables

Reference charts that list the predetermined costs for various products or services, facilitating cost control and budgeting.