Dewey, Cheatham, and How, Attorneys-At-Law, Specialize in Three Areas: Criminal

question 20

Multiple Choice

Dewey, Cheatham, and How, Attorneys-at-Law, specialize in three areas: criminal, civil, and family law.When specifications for a new IT system were established, the partners agreed to allocate fixed costs based on gigabytes needed by each department.The criminal law division needed 40% of the capacity, civil law needed 35%, and family law needed 25%.Variable costs for the IT department are allocated on the amount of bandwidth used by each division used.The IT department's budgeted monthly fixed costs are $640,000, and the budgeted monthly variable costs are $160,000.The firm estimates that 8,000,000 gigabytes of computer time will be used in June.During June, the family law division used 1,900,000 gigabytes of bandwidth.How much are total variable IT costs to be allocated to the family law division during June? Compute cost allocation rates to 3 significant digits.

• A)$160,000
• B)$60,000
• C)$40,000
• D)$38,000

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Definitions:

Effective Yield

A measure of the return on an investment, taking into account the effect of compounding interest.

Simple Annualized

A method of calculating the return on an investment by annualizing its simple interest without accounting for compounding.

Holding-Period Return

The total return received from holding an asset or portfolio of assets over a specified period of time.

Quarterly Compounded

Interest that is calculated and added to the principal every three months, increasing the amount on which subsequent interest calculations are based.