The Method That Starts with Net Income and Adjusts It

question 119

Multiple Choice

The method that starts with net income and adjusts it for items that affect net income, but do not affect cash is called the:

• A) lower-of-cost or market method.
• B) direct method.
• C) indirect method.
• D) gross profit method.

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Definitions:

Direct Materials

Raw materials that are directly attributable and integral to the manufacturing of a product.

Ceramic Tile

A durable, hard surface tile made from clay that has been fired at high temperatures, used for covering floors, walls, or other surfaces.

Administrative Expense

Expenses related to the general operation of a business, including executive salaries, legal and professional fees, and office supplies.

Variable Cost

Costs that fluctuate in direct proportion to changes in levels of output or activity within a business.