Which of the Following Statements About the Use of a Captive

question 46

Multiple Choice

Which of the following statements about the use of a captive insurance company by a parent firm is true?

• A)The captive may not write outside,non-parent company,business.
• B)Captives are not permitted to use reinsurance,so any business insured by the captive stays with the captive.
• C)The captive may be used to insure loss exposures that the parent firm finds it difficult to insure with private insurers.
• D)Business placed with the captive is always considered retained risk and is never considered transferred risk.

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Definitions:

AQ × AP

Represents the multiplication of the Actual Quantity (AQ) by the Actual Price (AP), often used in financial and operational analyses.

Total Variance

The overall difference between planned or standard costs and the actual costs incurred.

Total Labor Variance

The difference between the actual cost of labor and the budgeted or standard cost of labor over a period.

Total Overhead Variance

The difference between actual overhead costs incurred and overhead costs allocated to production, based on standard rates, during a specific period.