Detta Borrows $20,000 from the Bank

question 79

Multiple Choice

Detta borrows $20,000 from the bank. For a five-year loan, the bank requires annual end-of-year payments of $4,878.05. The annual interest rate on the loan is ________.

• A) 6 percent
• B) 7 percent
• C) 8 percent
• D) 9 percent

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Definitions:

Predetermined Overhead Rate

A rate calculated by dividing estimated overhead costs by an estimated activity base, used to allocate overhead costs to products or services.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production or sales, such as rent, salaries, and equipment depreciation within a manufacturing plant.

Manufacturing Overhead

All costs tied to production that are not direct materials or direct labor.

Indirect Cost

A cost that cannot be easily and conveniently traced to a specified cost object.