Which of the Following Statements Best Reflects the Concept Behind

question 91

Multiple Choice

Which of the following statements best reflects the concept behind the rule of indemnity?

• A) If a large number of people are exposed to the same risk, a predictable number of losses will occur during a given period of time.
• B) If a written contract exists between the insured and an insurance company, the insured is entitled to receive the maximum amount stated in the contract in the event of a loss.
• C) If an insurance company's premiums generate excess funds, these excess funds must be returned to the policyholders in the form of dividends or reductions in future premiums.
• D) An insured person cannot collect more than the actual loss from an insurable risk.

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Definitions:

Overhead Rate

A measure used to calculate how much overhead cost should be allocated to each unit of production, often based on direct labor hours or machine hours.

Assembly Department

A division within a manufacturing facility where parts are put together to form a finished product.

Machine-Hours

A measure used in costing to allocate expenses based on the number of hours a machine is operated.

Manufacturing Departments

Specific sections within a manufacturing company, each focusing on different aspects of the production process.