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

question 52

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 $400 to analyze and close a commercial loan. What is the overhead rate if Banc Corp. Trust allocates the remaining indirect costs using direct labor hours?

• A) $12.55 per hour.
• B) $18.00 per hour.
• C) $1,000 per loan.
• D) $800 per loan.

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Definitions:

Design Phase

A stage in product development where the specifications and features of a product are planned and detailed.

Manufacturing Cycle

The complete series of steps involved in producing a product, from raw material procurement to the final good.

Distributor/Manufacturer Interface

The point of interaction between distributors and manufacturers, dealing with the exchange of goods, information, and payments.

Outsourcing Decision

The process by which a company decides whether to allocate specific operational tasks or processes to external vendors rather than completing them internally.