Which of the Following Describes a Correct Priority of Claims

question 362

Multiple Choice

Which of the following describes a correct priority of claims in a bankruptcy liquidation?

• A) Wages, government tax claims, consumer claims, and preferred stockholders.
• B) Government tax claims, bankruptcy expenses, unsecured creditors, preferred stockholders.
• C) Bankruptcy expenses, consumer claims, unsecured creditors, government tax claims.
• D) Government tax claims, unsecured creditors, preferred stockholders, bankruptcy expenses.
• E) Bankruptcy expenses, wages, unsecured creditors, preferred stockholders.

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Definitions:

Fixed Overhead

Regular, consistent expenses not directly tied to production levels, such as rent, salaries, and insurance.

Direct Labor

The wages and benefits paid to employees who are directly involved in the production of goods or services.

Direct Materials

The raw materials that are directly incorporated into a finished product during the manufacturing process.

Fixed Overhead

Indirect costs that do not change with the level of production, such as rent and salaries.