A $200 Million Loan Commitment Has an Up-Front Fee of 20

question 83

Multiple Choice

A $200 million loan commitment has an up-front fee of 20 basis points and a back-end fee of 25 basis points on the unused portion. The up-front fee is

• A)$250,000.
• B)$4,000,000.
• C)$400,000.
• D)$775,000.
• E)$375,000.

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Definitions:

Predetermined Overhead Rate

A rate calculated before a period begins, used to apply manufacturing overhead costs to products based on a relevant activity, such as machine hours or labor hours.

Underapplied

Describes a situation where the allocated overhead costs in accounting are less than the actual overhead costs incurred.

Overapplied

A scenario in which the overhead cost assigned to manufacturing exceeds the overhead that was actually incurred.

Direct Labor-Hours

A measure of the labor directly involved in manufacturing a product, represented in hours.