To Prepare the Statement of Cash Flows Using the Indirect

question 109

Multiple Choice

To prepare the statement of cash flows using the indirect method ________ net income.

• A)a decrease in inventory is subtracted from
• B)a purchase of a machine is subtracted from
• C)cash paid for dividends is added to
• D)a decrease in accounts payable is subtracted from

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Definitions:

Estimated Overhead Cost

The projected costs of indirect materials, labor, and other expenses that are necessary for production but cannot be directly associated with specific product units.

Direct Labour-Hours

A measure of the amount of time workers spend directly manufacturing a product or providing a service.

Traditional Costing System

A traditional costing system allocates factory overhead to products based on volume-related measures such as direct labor hours or machine hours.

Overhead Cost Per Unit

This is the amount of indirect costs allocated to each unit of production, including costs not directly tied to the production like rent and utilities.