If the Add-On Method Is Used to Calculate a Finance

question 28

Multiple Choice

If the add-on method is used to calculate a finance charge of $150.80 on a $2,200 loan, the amount to be:

• A) repaid is $2,200.
• B) paid to the borrower is $2,049.20.
• C) repaid is $2,350.80.
• D) paid to the borrower is $2,350.80.
• E) paid to the borrower is $150.80.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production, based on a chosen activity base.

Direct Labor-Hours

The total hours worked by employees who are directly involved in the production process, used as a basis for assigning labor costs to products.

Machine-Hours

A measure of production time, quantified in hours, that machinery is operating to perform work.

Machining Department

A specialized division within a manufacturing operation that performs machining processes, such as cutting, shaping, or drilling materials.