Banc Corp Trust Is Considering Either a Bankwide Overhead Rate or or Department

question 76

Multiple Choice

Banc Corp. Trust is considering either a bankwide overhead rate or department overhead rates to allocate $396,000 of indirect costs. The bankwide rate could be based on either direct labor hours (DLH) or the number of loans processed. The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans. The following information was gathered for the upcoming period:
$$\begin{array} { l c c r } \text { Department } & \text { DLH } & \text { Loans Processed } & \text { Direct Costs } \\\text { Consumer } & 14,000 & 700 & \$ 280,000 \\\text { Commercial } & 8,000 & 300 & \$ 180,000\end{array}$$
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Banc Corp. Trust estimates that it costs $500 to analyze and close a commercial loan. This amount has been included in the $396,000 of indirect costs. How much of the $396,000 indirect costs should be allocated to the Commercial Department, if Banc Corp. Trust uses a bankwide rate based on the number of loans processed?

• A) $396,000.
• B) $246,000.
• C) $223,800.
• D) $216,000.

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Definitions:

Annual Pension

A financial arrangement that provides individuals with a regular payment during retirement, typically based on years of service and salary history.

Benefits Systems

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Cost Break-even Analysis

An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue.

Competitive Analysis

A process of evaluating the strengths and weaknesses of competitors in the market to identify opportunities and threats.