Dunston Company Will Receive $300,000 in a Future Year

question 48

Multiple Choice

Dunston Company will receive $300,000 in a future year. If the future receipt is discounted at an interest rate of 10%, its present value is $153,948. In how many years is the $300,000 received?

• A) 5 years
• B) 6 years
• C) 7 years
• D) 8 years

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Definitions:

Plantwide Overhead Rate

A single overhead absorption rate calculated for an entire manufacturing plant and applied to all units produced, simplifying the allocation of indirect costs.

Overhead Cost

Expenses related to the operation of a business that cannot be directly linked to a specific product or service.

Simplicity

The quality of being easy to understand or use; the absence of complexity or complication.

Departmental Overhead Costs

Expenses related to the indirect support of producing goods or services in specific departments, rephrased as the allocation of indirect costs to departmental operations.