Given the Items Below,which of the Following Is a Subtraction

question 56

Multiple Choice

Given the items below,which of the following is a subtraction from net income to arrive at Operating Cash Flows using the indirect method?
I. Loss on sale of assets
II. Increase in Supplies
III. Increase in Accounts Payable
IV. Depreciation expense

• A) II. only.
• B) IV. only.
• C) I. and II.
• D) II. and III.

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Definitions:

Absorption Costing

Absorption costing is a financial approach that integrates all production expenses, including direct materials, direct labor, and all overhead costs, both variable and fixed, into the product's cost.

Unit Product Cost

The total cost associated with producing one unit of a product, including direct and indirect costs.

Variable Costing Income Statement

A financial statement that only includes variable production costs in the cost of goods sold, with fixed production costs treated as period expenses.

Absorption Costing

In this accounting technique, all manufacturing-related costs - direct materials, direct labor, variable, and fixed overheads - are factored into the product's cost.