The Payoff Method Used by the FDIC to Address the Insolvency

question 47

Multiple Choice

The payoff method used by the FDIC to address the insolvency of a bank is when the FDIC:

• A) pays the owners of the bank for the losses they would otherwise face.
• B) pays off all depositors the balances in their accounts so no depositor suffers a loss, though the owners of the bank may suffer losses.
• C) pays off the depositors up to the current $250,000 limit, so it is possible that some depositors will suffer losses.
• D) takes all of the assets of the bank, sells them, pays off the liabilities of the bank in full, and then replenishes their fund with any remaining balance.

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Definitions:

Labor Rate Variance

The difference between the actual labor costs and the budgeted or standard labor costs, often due to differences in wage rates or work hours.

Standard Cost System

An accounting system that assigns predetermined costs to products and services, which are then compared to actual costs for variance analysis.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and are a significant portion of production costs.

Raw Materials Inventory

The stock of basic materials that are used in production but have not yet been processed.