Parmesan Company Uses the Direct Method for Its Statement of Cash

question 81

Multiple Choice

Parmesan Company uses the direct method for its statement of cash flow. It reports the following information regarding the year 2014: From the income statement:
Sales Revenues, $265,000
Cost of Goods Sold, $210,000
Operating expenses, $31,000
From the balance sheet:
$$\begin{array} { | l | r | r | } \hline & \text { Beginning Balance } & \text { Ending Balance } \\\hline \text { Accounts Receivable: } & \$ 14,500 & \$ 17,800 \\\hline \text { Inventory: } & 23,500 & 17,800 \\\hline \text { Accounts Payable: } & 6,000 & 13,500 \\\hline \text { Accrued Liabilities: } & 4,000 & 1,500 \\\hline\end{array}$$ On the statement of cash flows, what amount will be shown for collections from customers?

• A) $261,700
• B) $268,300
• C) $265,000
• D) $32,300

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Definitions:

Overhead Costs

Expenses that are not directly tied to production activities, such as rent, utilities, and administrative expenses.

Batch-level Activities

Operations carried out on groups or batches of units rather than on individual units, often incurring costs that are common to the batch rather than to a single unit.

Batch-level Activity Cost

Costs associated with activities that are related to a batch of products rather than each individual unit, such as the cost of setting up machinery for each batch.

Departmental Overhead Rates

The method for allocating overhead costs to specific departments based on departmental activities and cost drivers.