Use the Following to Answer Questions: for This Table, Assume

question 29

Multiple Choice

Use the following to answer questions: For this table, assume that all banks observe the same required reserve ratio requirement. Also assume that the banks are listed in sequential order (thus the loans from the First National Bank become the deposits for the Second National Bank, and the loans from the Second National Bank become the deposits for the Third National Bank, and so on.) Also, the bank's balance sheets must always be balanced.
Table: Multiple Deposit Expansion First National Bank
$\begin{array}{ll}\hline \text { ASSETS } & \text { LIABILITIES } \\\hline \text { Required reserves }& \text { Deposits }\quad \$ 400,000 \\\text { Loans }\quad\$ 368,000 & \\\text { TOTAL } & \text { TOTAL }\end{array}$

$\begin{array}{ll}\text { Second National Bank } & \\\hline \text { ASSETS } & \text { LIABILITIES } \\\hline \text { Required reserves } & \text { Deposits } \\\text { Loans } & \\\text { TOTAL } & \text { TOTAL } \\\hline\end{array}$

$\text { Third National Bank }$
$\begin{array}{ll}\hline \text { ASSETS } & \text { LIABILITIES } \\\hline \text { Required reserves } & \text { Deposits } \\\text { Loans } & \\\text { TOTAL } & \text { TOTAL }\end{array}$
-(Table: Multiple Deposit Expansion) Refer to the table. For the multiple deposit expansion process described in this table, what is the maximum amount of loans that the Second National Bank can make if it holds only the required reserves?

• A) $338,560
• B) $30,470.40
• C) $308,089.60
• D) $311,475.20

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Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing more accurate product or service costing.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including utilities, depreciation of equipment, and salaries of maintenance staff.

Plantwide Overhead Rate

This is a single overhead rate calculated by dividing all of a plant's manufacturing overhead costs by its total activity base, such as labor hours or machine hours, used across the entire factory.

Direct Labor-Hour

A unit of measure representing the labor time expended by workers directly involved in the manufacturing process, often used in cost accounting.