Ahab's Army Surplus Has a Committed Line of Credit with a Maximum

question 12

Multiple Choice

Ahab's Army Surplus has a committed line of credit with a maximum of $1.2 million and interest rate of 3.5% (EAR) .The loan has a commitment fee of 0.45% (EAR) .If the firm borrows $900,000 at the start of the year and repays it at the end of the year,what is the total cost of the loan?

• A)$42,000
• B)$35,550
• C)$43,350
• D)$32,850
• E)$31,500

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Definitions:

Multiproduct Company

A business entity that manufactures or sells more than one type of product, often across different product lines or industries.

Sales Volumes

The total quantity of a product or service sold by a company during a specific period.

Multiproduct CVP Analysis

A Cost-Volume-Profit analysis extension that assesses the profit impact of selling multiple products, considering their respective contribution margins and fixed costs.

Changing Sales Mix

Refers to alterations in the proportion of different products or services sold by a company, impacting revenue and costs.