The CPA firm of Peck, Williams, and Shafner is conducting an audit of Monolith Enterprises. The audit is estimated to take 4 months to complete and will use $4,000 in supplies, $200,000 in labor, and $320,000 in overhead. Peck's annual rate is 18%. What are the financial holding costs on this project?

Question

Quizplus · Accepted Answer

To calculate the financial holding costs, we need to first calculate the total cost of the project. This would be the sum of supplies, labor, and overhead costs, which is: 
$4,000 + $200,000 + $320,000 = $524,000

Next, we need to calculate the monthly equivalent of the annual rate of 18%. This would be: 
18% / 12 = 1.5%

Finally, we can calculate the financial holding costs by multiplying the total project cost by the monthly interest rate and the duration of the project in months: 
$524,000 x 1.5% x 4 = $31,440

Therefore, the financial holding costs on this project are $31,440, which corresponds to choice (B).

The CPA Firm of Peck, Williams, and Shafner Is Conducting