The indirect method starts with net income and adjusts for noncash items and changes in working capital.

As per Saylor Academy BUS105 – Unit 12.2: The Statement of Cash Flows:

“Depreciation and amortization are added back to net income under the indirect method. Increases in current assets (like accounts receivable) are subtracted from net income.”

Thus, applying these rules:

463,000 + 38,500 + 17,950 + 4,000 − 29,900 = 493,550

Answer: B

Comprehensive and Detailed Explanation:

The Manufacturing Overhead account is used to track both actual and applied overhead. At the end of the period, the difference is calculated:

If actual > applied → underapplied (debit balance)

If applied > actual → overapplied (credit balance)

Answer: A

Target cost is a pricing strategy that starts with the selling price and subtracts the desired profit to determine the maximum allowable cost.

Formula:

Target Cost = Selling Price − Desired Profit

Desired Profit = Selling Price × Profit Percentage

= $350 × 0.40 = $140

Target Cost = $350 − $140 = $210

Answer: C

Return on Investment (ROI) is a performance measure used to assess how effectively a division is using its assets to generate operating income. ROI = Operating Income / Average Operating Assets. According to Saylor Academy BUS105, Unit 11.2 – Measuring Performance:

“ROI provides a way to evaluate how well managers use the assets at their disposal to generate profits.”

All components used in the denominator (cash, accounts receivable, property, plant, and equipment, and inventory) are operating assets, so they are valid for ROI calculation.

Wycliff Corporation uses cost pools for assembly and shipping to calculate a predetermined overhead rate for each department . This means the company calculates separate overhead rates for different departments (in this case, assembly and shipping) rather than using a single rate for the entire plant or allocating overhead based on individual activities.

According to Saylor Direct Credit Courses in Managerial Accounting (BUS105), Departmental Overhead Rate Method is defined as follows:

"When a company has more than one department that incurs manufacturing overhead costs, it may be more accurate to use a departmental overhead rate for each department. Each department establishes its own overhead rate by dividing the total overhead costs for that department by the total amount of its allocation base (such as machine hours or direct labor hours)."

(Reference: Saylor Academy BUS105, Unit 3: How Is Job Costing Used to Track Production Costs? Section 3.4 “Departmental and Plantwide Overhead Rates”)

This is different from:

Activity-Based Costing (A) , which uses multiple cost pools based on different activities, not necessarily departments.

Plantwide Rate (C) , which uses a single overhead rate for the entire plant.

Process Costing (D) , which is used for mass production of similar products, not overhead allocation per department.

Wycliff’s system fits the Departmental method, as they allocate costs by department (assembly and shipping) rather than by activity (activity-based) or across the whole plant (plantwide).