Which of the Following Statements Is True About Cancellation of an Insurance

question 31

Multiple Choice

Which of the following statements is true about cancellation of an insurance policy?

• A) Insurers can cancel insurance contracts by surrendering the policy to the insured.
• B) Insurance contracts contain a reinstatement clause that allows an insured to reinstate a cancelled policy.
• C) Insureds who terminate a contract are entitled to a return of the premium on a short-rate basis.
• D) Insurers that cancel a contract need not return the unearned portion of any premiums paid by the insured.

Understand the concept of absorption costing versus variable costing and their impact on net operating income.

Calculate net operating income under both absorption and variable costing.

Identify the effects of changes in inventory levels on net operating income under absorption costing.

Compute gross margin under absorption costing.

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Definitions:

Intragroup Merchandising Transactions

Transactions for the sale and purchase of goods and services that occur between entities within the same group of companies.

Consolidation Process

The method by which a parent company combines its financial statements with those of its subsidiaries to produce a single set of financial statements representing the entire corporate group as one entity.

Reliance on a Major Customer

A situation where a significant portion of a company's revenue comes from sales to a single customer.