Which of the Following Statements Is (Are)true About the Loss

question 24

Multiple Choice

Which of the following statements is (are) true about the loss ratio method of class rating?
I.The pure premium is calculated,and it is loaded to cover expenses,profit,and contingencies.
II.The actual loss ratio is compared to the expected loss ratio,and the rate is adjusted accordingly.

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

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, including maintenance, utilities, and salaries of maintenance workers, not directly tied to a specific product.

Job Cost

The total cost associated with completing a specific job, including materials, labor, and overhead.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or job orders, calculated before the period begins based on estimated costs and activity levels.

Machine-Hour

A unit of measure representing the operation of a machine for one hour.