Which of the Following Statements About the Use of Risk-Based

question 4

Multiple Choice

Which of the following statements about the use of risk-based capital requirements is (are) true?
I.Insurers must have a certain amount of capital depending on the riskiness of their investments and insurance operations.
II.Insurers may be required to take certain actions depending on how much capital they have relative to their risk-based capital requirements.

• A)I only
• B)II only
• C)both I and II
• D)neither I nor II

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Definitions:

Predetermined Overhead Rate

An estimated rate used to apply manufacturing overhead to products or job orders, calculated before a period begins based on expected costs and activity levels.

Traditional Costing System

A method of cost accounting that allocates factory overhead to products based on volume-driven measures such as machine hours or labor hours.

Manufacturing Overhead

Consists of all manufacturing costs that are not directly associated with the production of goods, including indirect labor, maintenance, and factory utilities.

Direct Labor-Hours

The compiled working hours of employees directly active in manufacturing tasks.