If Insurance Premiums Are Based on an Experience Rating

question 68

Multiple Choice

If insurance premiums are based on an experience rating,

• A) every firm in a given area pays the same price for medical insurance.
• B) insurance premiums are based on the past medical bills of a firm's employees.
• C) firms have no incentive to try to lower the health care costs of their employees.
• D) firms will not be concerned with the health problems of job applicants.

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Definitions:

Equivalent Units

A concept in process costing used to compute the amount of complete units that could have been produced given the total amount of work done.

Weighted-Average Method

An inventory valuation method that averages the cost of all similar goods available during a period to determine the cost of goods sold and ending inventory value.

Conversion Costs

Expenses related to turning raw materials into complete goods, usually encompassing direct workforce costs and manufacturing overhead expenses.

Processing Department

A section within a manufacturing facility where raw materials are converted into finished products through a series of operations or processes.