Banc CorpTrust Is Considering Either a Bankwide Overhead Rate or Department

question 76

Multiple Choice

Banc Corp.Trust is considering either a bankwide overhead rate or department overhead rates to allocate $396,000 of indirect costs.The bankwide rate could be based on either direct labor hours (DLH) or the number of loans processed.The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans.The following information was gathered for the upcoming period:
$$\begin{array} { | l | l | l | r | } \hline \text { Department } & \text { DLH } & \text { Loans Processed } & \text { Direct Costs } \\\hline \text { Consumer } & 14,000 & 700 & \$ 280,000 \\\hline \text { Commercial } & 8,000 & 300 & \$ 180,000 \\\hline\end{array}$$
Banc Corp.Trust estimates that it costs $500 to analyze and close a commercial loan.This amount has been included in the $396,000 of indirect costs.How much of the $396,000 indirect costs should be allocated to the Consumer Department?

• A) $246,000.
• B) $280,000.
• C) $172,200.
• D) $116,000.

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Definitions:

Debits

Accounting entries that increase an asset or expense account, or decrease a liability or equity account, recorded on the left side of an accounting ledger.

Account Receivable

The amount customers are required to pay a company for products or services received but for which payment has not yet been made.

Total Assets

Total assets represent the sum of all assets owned by an entity, including both current and non-current assets, indicating the total resources available to the entity.

Utility Company

A utility company is an organization that provides essential services to the public, such as water, electricity, natural gas, and sewage treatment.