Which of the Following Is an Explanation for Why Insurance

question 60

Multiple Choice

Which of the following is an explanation for why insurance premiums on a key employee are not deductible?

• A)A deduction for the insurance premium would offset taxable income without the potential for the proceeds generating taxable income.
• B)The federal government does not want to subsidize insurance companies.
• C)It is impractical to trace insurance premiums to the receipt of proceeds.
• D)Congress presumes that all expenses are not deductible unless specifically allowed in the Internal Revenue Code.
• E)This rule was grandfathered from a time when the Internal Revenue Code disallowed all insurance premiums deductions.

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Definitions:

Predetermined Overhead Rate

An estimated overhead rate used to apply the estimated cost of production overhead to individual products or job orders based on a particular activity, such as machine hours or labor hours.

Milling Department

The milling department refers to a specific section within a manufacturing facility where milling, a process of using rotary cutters to remove material, is performed.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including those related to running the factory outside direct labor and materials.

Job-Order Costing System

A cost accounting system in which costs are assigned to specific jobs or orders, used in industries where goods or services are produced to order.