Why Are Consolidated Financial Statements Prepared

question 149

Multiple Choice

Why are consolidated financial statements prepared?

• A)The American Institute of Certified Public Accountants requires consolidated financial statements in certain situations.
• B)The Securities and Merchant Commission requires consolidated financial statements in certain situations.
• C)The Society of Certified Fraud Examiners requires consolidated financial statements in certain situations.
• D)So financial statement users get a better picture of the total operations of the parent and subsidiary together.

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Definitions:

Direct Labor-Hours

A measure of the time workers spend directly manufacturing a product, used in calculating labor costs and efficiency.

Variable Overhead

Costs of indirect production activities that fluctuate with the level of production output, such as electricity for machinery or materials handling costs.

Direct Materials

Direct materials are raw materials that are directly used in the manufacturing process of a product and can be easily traced to the product itself.

Direct Labor-Hours

A measure of the total amount of time worked by employees directly involved in manufacturing a product or delivering a service.