Assume a Wire Transfer Provides Immediate Availability,a Depository Transfer Check

question 1

Multiple Choice

Assume a wire transfer provides immediate availability,a depository transfer check provides two-day availability,and deposit balances earn an ECR (earned credit rate) of 8%.Under these assumptions,the minimum amount a company can transfer in order to justify the cost of a wire transfer is $200,000.If the bank reduces the ECR to 5%,the amount required to justify a wire transfer will:

• A)not change
• B)increase
• C)decrease
• D)you cannot determine the direction of change from the given information

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Definitions:

Conversion Cost

The combined cost of direct labor and overhead expenses incurred to convert raw materials into finished goods.

Cooking Department

A specific section within a food production facility where raw ingredients are prepared and cooked.

FIFO Method

An accounting method where the first items added to inventory are the first ones considered sold.

Equivalent Unit

A concept used in cost accounting to convert partially completed units into a number of fully completed units.