Management Has Authorized the Purchase of a Large Quantity of Inventory

question 111

Multiple Choice

Management has authorized the purchase of a large quantity of inventory for early December.The purchase will have credit terms of 2/10,n/30,they will authorize payment by the discount date.How will this decision affect the period's cash flows from operations-indirect method?

• A)It will increase this period's cash flows from operations.
• B)It will decrease this period's cash flows from operations.
• C)It will not affect this period's cash flows from operations.
• D)This does not affect cash flows from operations.

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Definitions:

Variable Selling Costs

Costs that vary directly with the volume of units sold, such as commissions and shipping expenses.

Variable Production Costs

Expenditures that change in direct correlation with production volumes, like direct labor and raw materials used.

Absorption Costing

An accounting method that includes all direct costs and overhead costs related to the production of a specific product.

Product Costs

Expenses directly attributable to the creation of a product, including material, labor, and overhead costs.