Roger Ray Runs a Motel in a Rented Property and Sublets

question 59

Multiple Choice

Roger Ray runs a motel in a rented property and sublets a part of its garage to the owner of a nearby fuel station. Three months later, the motel catches fire from a fuel leak in the garage and Roger suffers severe damages. If Roger owns a standard fire insurance policy for years, the insurer can use the ________ to refuse covering the damage caused by the fire.

• A) deductible clause
• B) exclusions from coverage clause
• C) incontestability clause
• D) copay clause

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Definitions:

Margin of Safety

The difference between actual or projected sales and the break-even point, often expressed as a percentage.

Contribution Margin Ratio

A financial metric showing the percentage of revenue that exceeds total variable costs, indicating how much revenue contributes to fixed costs and profit.

Break-even Sales

The amount of revenue needed to cover all fixed and variable costs, resulting in no profit or loss.

Variable Cost

Costs that change in proportion to the level of production or sales activity, such as raw materials and direct labor costs.