Columbia Bank & Trust Has Just Given You a $20,000

question 18

Multiple Choice

Columbia Bank & Trust has just given you a $20,000 term loan to pay for a new concrete mixer.The loan requires five equal annual end of the year payments.If the loan provides the bank with a 12 percent return, what will be your annual payments?

• A)$5,548
• B)$3,148.12
• C)$6,000
• D)$1,666.67

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Definitions:

Fixed Manufacturing Overhead

Costs associated with the production process that do not vary with the level of output, such as salaries of managers or rent of the factory building.

Inventories

Materials, work in progress (WIP), and finished goods held by a company to enable production and meet customer demand.

Deferred

Deferred refers to something that is postponed or delayed to a later time, often used in the context of accounting to describe expenses or income.

Absorption Costing

An accounting method that includes all manufacturing costs (direct labor, direct materials, and both variable and fixed overhead) in the cost of a product.