Use the Fact Situation in Q2 to Answer the Related

question 37

Multiple Choice

Use the fact situation in Q2 to answer the related question that follows. Assume that the bank is a secured creditor of General Widgets and that its security is greater than the amount that the company owes to the bank,which enforces its security.In such a case,

• A)the bank cannot enforce its security,but it will share rateably with the other secured creditors.
• B)the bank cannot enforce its security during the bankruptcy of the company.
• C)the bank can retain the full amount recovered under its security.
• D)the bank must repay the trustee in bankruptcy any excess recovered over the amount of the debt owed it.
• E)none of the above

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Definitions:

Total Manufacturing Costs

The aggregate of all costs involved in producing a finished product, including direct materials, direct labor, and manufacturing overhead.

Manufacturing Overhead Applied

The amount of manufacturing overhead costs allocated to individual products or product lines based on a predetermined overhead rate.

Direct Materials

Raw materials that are directly used in the manufacturing of a product and can be easily traced back to the finished goods.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, based on a predetermined activity base.