Your Father's Employer Was Just Acquired,and He Was Given a Severance

question 50

Multiple Choice

Your father's employer was just acquired,and he was given a severance payment of $305,000,which he invested at a 7.5% annual rate.He now plans to retire,and he wants to withdraw $35,000 at the end of each year,starting at the end of this year.How many years will it take to exhaust his funds,i.e. ,run the account down to zero?

• A) 10.99
• B) 13.49
• C) 16.27
• D) 11.73
• E) 14.66

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Definitions:

Activity-Based Costing

An accounting method that assigns costs to products or services based on the activities and resources that go into producing them.

Direct Materials Cost

The cost of raw materials and components that are directly traceable to the production of goods.

Direct Labor Cost

The cost associated with the labor of employees directly involved in the production of goods or services.

Direct Labor-Hours

A measure of the time spent by workers directly creating a product, which is used to allocate labor costs properly.