Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions:
The Dedham Cooperative Bank is considering either a bank wide overhead rate or departmental overhead rates to allocate $2,000,000 of indirect costs. The bank wide rate would be based on either direct labor hours or the number of loans processed. The departmental rates would be based on direct labor time for Consumer Loans and a dual rate based on direct labor time and the number of loans processed for
Commercial Loans. The following information was gathered for the upcoming period:

-The bank estimates that the Commercial Department will result in $3,000,000 of revenues in 2008. If the indirect costs are allocated based on direct labor hours, what profit before tax will be generated by the Commercial Department?

A) $1,900,000
B) $2,300,000
C) $2,800,000
D) $2,000,000
E) *** $2,000,000/20,000 = $100