Management estimates that it costs $500 to analyze and close a commercial loan.This amount has been included in the $250,000 of indirect costs.How much of the $250,000 indirect costs should be allocated to the Consumer Department?
A)$50,000.
B)$90,000.
C)$160,000.
D)$200,000.

Question

Quizplus · Accepted Answer

The $500 cost for analyzing and closing a commercial loan is part of the $250,000 indirect costs. Since this cost is specific to commercial loans, it should not be allocated to the Consumer Department. Therefore, the remaining $250,000 - $500 = $249,500 should be allocated based on the department's share of indirect costs. If the Consumer Department's share is not specified, the assumption is that the remaining indirect costs are allocated proportionally, leading to $160,000 being allocated to the Consumer Department.

Management Estimates That It Costs $500 to Analyze and Close