A Salesperson Contacts the Risk Manager to Report Substantial Damage

question 27

Multiple Choice

A salesperson contacts the risk manager to report substantial damage to a customer's production line due to the malfunction of equipment purchased 12 months earlier. Why doesn't the salesperson contact a lawyer instead?

• A) The limitation of liability in the contract was not known.
• B) Sales departments are not part of risk management.
• C) The customer has not commenced legal action yet.
• D) Authority to contact legal counsel is restricted.

Analyze transactions involving the exchange of assets, including the determination of gains or losses.

Apply various depreciation methods to calculate depreciation expense.

Understand the concept of goodwill in accounting and how it is measured.

Record and understand the transactions involving the purchase and disposition of equipment.

---

Definitions:

Conversion Costs

The combined costs of direct labor and manufacturing overhead to convert raw materials into finished goods.

Raw Materials

The basic substances or components used in the manufacturing or production process to create goods and products.

Cycle Efficiency

A measure of the effectiveness of a production process in terms of minimizing waste and maximizing productivity within a given time frame.

Cycle Time

The total time taken from the start to the finish of a production process or operation.