Carla Insures Her Residence for $300,000 When It Is in Fact

question 16

Multiple Choice

Carla insures her residence for $300,000 when it is in fact worth $500,000.If the contract contains a 'subject to average' clause and a fire causes $100,000 worth of damage,how much is the insurer obliged to pay?

• A)$75,000.
• B)$60,000.
• C)$100,000.
• D)$80,000.

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Definitions:

Accounting Break-even

The point at which total costs and total revenues are equal, leading to neither profit nor loss.

Variable Costs

Costs that vary directly with the level of output or production, such as materials and labor.

Fixed Costs

Expenses that do not change with the level of goods or services produced over a short period, such as rent or salaries.

Financial Break-even

The point at which a company's total revenues are exactly equal to its total expenses, resulting in neither profit nor loss.