Your Employer Needs to Borrow $550,000 to Finance Inventory for the Upcoming

question 40

Multiple Choice

Your employer needs to borrow $550,000 to finance inventory for the upcoming seasonal rush.BIG Bank has offered to finance the inventory at 8% provided that your employer keeps a compensating balance in its operating account of 8%.How much must your employer borrow to end up with the $550,000?

• A) $597,826
• B) $594,000
• C) $588,500
• D) $87,926

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Definitions:

Indirect Labor

Labor costs of employees who assist in the production process but do not directly work on the production of goods or services.

Factory Overhead

Factory overhead refers to the indirect costs associated with manufacturing, including utilities, maintenance, and management salaries.

Indirect Materials

Materials used in the production process that cannot be directly linked to a specific product, such as lubricants for machines.

Indirect Cost

Expenses that are not directly attributable to a specific business activity or product, such as overhead costs like utilities or rent.