Under the Indirect Method, Depreciation Expense Must Be Added Back

question 68

True/False

Under the indirect method, depreciation expense must be added back to net income under the operating activities.

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Definitions:

Direct Labor Cost

The wages and related benefits of employees who are directly involved in the production of goods or services.

Manufacturing Overhead

All indirect costs associated with the production of goods, such as utilities and salaries for non-direct labor.

Direct Materials Costs

The expense associated with raw materials or components that are directly included in a manufactured product.

Predetermined Overhead Rate

A predetermined overhead rate is a rate calculated before a period begins, used to allocate overhead costs to products or services based on a specific activity base.