The Indirect Method Begins with Net Income,while the Direct Method

question 23

True/False

The indirect method begins with net income,while the direct method considers each of the individual accounts that make up net income.

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Definitions:

Variable Costing

An accounting method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

Direct Labour

The labour costs directly attributable to the production of goods or services, including wages for workers who physically manufacture a product.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, excluding direct materials and direct labor costs.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed expenses and then contribute to profit.