Refer to the Information Provided in Scenario 10

question 352

Multiple Choice

Refer to the information provided in Scenario 10.2 below to answer the questions that follow.
SCENARIO 10.2: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up.
-Refer to Scenario 10.2. If the required reserve ratio were changed to 20%, total loans of Bank No. 2 will change to

• A) $64,000.
• B) $72,000.
• C) $74,250.
• D) $80,000.

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Definitions:

Activity-Based Costing

An expense determination technique that identifies organizational activities and attributes the cost of each to all products and services, commensurate with their genuine consumption.

Direct Materials Cost

The cost of raw materials and components that are directly involved in the production of a product, easily traceable to the end product.

Direct Labor Cost

The wages and other expenses for labor directly involved in the manufacture of specific goods or services.

Direct Labor-Hours

All the hours contributed by workers directly participating in creating products.