The Standard Financial Statements Prepared by Accountants Have to Be

question 23

Multiple Choice

The standard financial statements prepared by accountants have to be modified for managerial purposes.Related to these modifications,which of the following statements is correct?

• A)The standard statements make adjustments to reflect the effects of inflation on asset values, and these adjustments are normally carried into any adjustment that managers make to the standard statements.
• B)The standard statements focus on accounting income for the entire corporation, not cash flows, and the two can be quite different during any given accounting period.
• C)The standard statements provide useful information on the firm's individual operating units, but management needs more information on the firm's overall operations than the standard statements provide.
• D)The standard statements focus on cash flows, but managers are less concerned with cash flows than with accounting income as defined by GAAP.

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Definitions:

Direct Labor Hours

The total number of working hours spent by employees directly involved in the production of goods or services.

Machine Hours

A measure of the amount of time a machine is operated, used in manufacturing to allocate costs to products based on machine usage.

Hooded Jacket

A type of apparel that includes a hood attached to it, often used for casual wear or protection against weather.

Departmental Overhead Rate

A calculation used to allocate overhead costs to specific departments, based on varying bases such as labor hours or machine hours.