When Preparing a Statement of Cash Flows Using the Indirect

question 46

True/False

When preparing a statement of cash flows using the indirect method,a decrease in accounts payable is subtracted from net income.

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Definitions:

Plantwide Factory Overhead Allocation

Plantwide factory overhead allocation involves spreading all of the indirect costs of operating a manufacturing plant across all products based on a single cost driver.

Plantwide Factory Overhead Rate

This rate calculates the total factory overhead for a plant as a single rate, which is then applied to allocate overhead costs to different products.

Allocation-Base Usage

The process of distributing costs based on predetermined criteria or bases, such as labor hours or machine hours.

Activity Rates

The estimated activity cost divided by estimated activity-base usage.