If the Proportion of Bad Borrowers Increases

question 24

Multiple Choice

If the proportion of bad borrowers increases

• A)the borrowing and lending interest rates are equal.
• B)the borrowing interest rate increases.
• C)the lending interest rate decreases.
• D)the lending interest rate increases.
• E)the borrowing interest rate decreases.

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Definitions:

Conversion Costs

Conversion costs are manufacturing or production costs that include direct labor and overhead expenses, necessary to convert raw materials into finished goods.

Equivalent Units

Equivalent units refer to a conversion measure used in cost accounting to express the amount of work done by manufacturers on units that are only partially completed at the end of an accounting period.

Process Costing System

An accounting methodology used in manufacturing, where costs are assigned to processes or departments and averaged over the units produced, suitable for homogeneous products.

Lumber Mill

A facility where logs are cut, planed, and processed into lumber and other wood products for construction and manufacturing.