Which of the Following Items Would Normally Be Excluded from the Computation

question 36

Multiple Choice

Which of the following items would normally be excluded from the computation of working capital?

• A) Advances from customers for goods that will be shipped three months after the balance sheet date
• B) The portion of long-term debt that matures six months after the balance sheet date and will be paid from the regular cash account
• C) Prepaid insurance
• D) Cash surrender value of life insurance

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Definitions:

Direct Materials Purchases Variance

A measure used in managerial accounting to compare the actual cost of direct materials to the expected cost.

Direct Labor-Hours

The cumulative hours put in by workers directly engaged in manufacturing products or delivering services.

Labor Rate Variance

The variance between the real labor costs and the projected or normative labor costs.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the expected (or standard) variable overhead based on output levels.