Using the Earnings Multiple Approach Calculate How Much Life Insurance

question 63

Multiple Choice

Using the earnings multiple approach calculate how much life insurance Heather and Robert need to take out on Heather. She earns $80,000 and is 37 years old. They want coverage until she retires at age 67. Robert is sure he can get an annual rate of return on the policy settlement of 8%. They have no children.

• A) $1,004,227
• B) $997,553
• C) $854,214
• D) $630,417
• E) none of the above

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Definitions:

Conversion Costs

Expenses incurred in the process of converting raw materials into finished goods, typically including labor and overhead.

Weighted-Average Method

A cost accounting method that calculates the cost of inventory based on the average cost of all similar items in inventory, irrespective of when they were purchased.

Molding Department

A specialized section in a manufacturing facility where the molding of materials into parts or products is performed.

Conversion Costs

The combined costs of direct labor and manufacturing overheads, representing the expenses to convert raw materials into finished goods.