Abank offers your firm a revolving credit arrangement for up to $69 million at an interest rate of 1.40 percent per quarter. the bank also requires you to maintain a compensating balance of 5 percent against the unused portion of the credit line, to be deposited in a noninterest-bearing account. assume you have a short-term investment account at the bank that pays .81 percent per quarter, and assume that the bank uses compound interest on its revolving credit loans. (do not round intermediate calculations. round the final answers to 2 decimal places.)

(a) what is your effective annual interest rate (an opportunity cost) on the revolving credit arrangement if your firm does not use it during the year?
(b) what is your effective annual interest rate on the lending arrangement if you borrow $35 million immediately and repay it in one year?

Exercise 6-2 variable costing income statement; explanation of difference in net operating income [lo6-2] ida sidha karya company is a family-owned company located on the island of bali in indonesia. the company produces a handcrafted balinese musical instrument called a gamelan that is similar to a xylophone. the gamelans are sold for $970. selected data for the company’s operations last year follow: units in beginning inventory 0 units produced 200 units sold 180 units in ending inventory 20 variable costs per unit: direct materials $ 130 direct labor $ 300 variable manufacturing overhead $ 30 variable selling and administrative $ 15 fixed costs: fixed manufacturing overhead $ 63,000 fixed selling and administrative $ 25,000 the absorption costing income statement prepared by the company’s accountant for last year appears below: sales $ 174,600 cost of goods sold 139,500 gross margin 35,100 selling and administrative expense 27,700 net operating income $ 7,400 required: 1. under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year? 2. prepare an income statement for last year using variable costing.