Assume the multiplier method is used and the multiplier is determined to be 4 based on experience. Accounting records show that the measured external failure costs are $550,000. Then the total external failure costs are estimated to be
A) $166,667.
B) $38,500.
C) $2,200,000.
D) $4,500,000.

Question

Quizplus · Accepted Answer

Using the multiplier method, total external failure costs can be estimated by multiplying the measured external failure costs by the multiplier.

Total external failure costs = Measured external failure costs x Multiplier

Total external failure costs = $550,000 x 4

Total external failure costs = $2,200,000

Therefore, the estimated total external failure costs are $2,200,000, which corresponds to choice C.

Assume the Multiplier Method Is Used and the Multiplier Is