Use the Rule of 78 to Find the Payoff Amount

question 30

Multiple Choice

Use the Rule of 78 to find the payoff amount for the loan paid in full before the date of maturity.
-Finance charge: $5415 Total number of payments: 149
Amount per payment: $319
Remaining number of payments, when paid in full: 12

• A)$4109.20
• B)$3796.02
• C)$3790.20
• D)$4115.02

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Definitions:

Cost Allocation

The process of identifying, aggregating, and assigning costs to cost objects, such as departments, products, or projects, for budgeting, accounting, or costing purposes.

Reciprocal Services

The process in cost accounting where two or more departments provide services to each other and the costs of these services are allocated between them.

Direct Method

A costing approach that allocates service department costs directly to producing departments without considering service department interactions.

Support Department

A division within an organization that provides essential services to other departments but does not directly contribute to profit, such as IT or HR.