Suppose a Bank Has $2,000,000 in Deposits,a Minimum Reserve Requirement

question 135

Multiple Choice

Suppose a bank has $2,000,000 in deposits,a minimum reserve requirement of 10 percent,and bank reserves of $250,000.Then the bank has excess reserves of:

• A) $50,000
• B) $250,000
• C) $450,000
• D) $1,550,000

---

Definitions:

Activity-Based Costing

is a method of accounting that assigns costs to products based on the activities they require, aiming to provide more accurate product costing.

Activity Rate

The activity rate refers to a predetermined overhead rate used in activity-based costing to allocate costs to products or services based on specific activities.

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to assign overhead costs to products or job orders based on a relevant activity base such as machine hours or labor hours.

Direct Labor-Hours

The sum of all hours spent by workers who are directly engaged in manufacturing, used as a foundation for distributing labor expenses to products or services.