Which of the Following Is True Regarding the Contention of ABC

question 21

Multiple Choice

Which of the following is true regarding the contention of ABC Insurance that it is not required to pay to Image Company the amount for which Bruno's life was insured?

• A) ABC Insurance Company is incorrect because Image Company held an economic interest in Bruno's life at the time the insurance was purchased.
• B) ABC Insurance Company is correct because Image Company no longer had an economic interest in Bruno's life.
• C) ABC Insurance Company is correct only if Bruno's new employer had purchased life insurance on his life.
• D) ABC Insurance Company is incorrect because Image Company had an economic interest in Bruno based on his possession of the jeep that Image Company still owned.
• E) ABC Insurance Company is incorrect only if Image Company owed Bruno retirement or some other sort of benefit.

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Definitions:

Standard Cost Card

A document that details the standard quantities and costs of materials, labor, and overhead for a specific product.

Fixed Manufacturing Overhead

These are the production costs that do not change with the volume of production, such as rent, salaries, and insurance.

Direct Labor Costs

Expenses that can be directly traced to the production of goods or services, including wages of workers who are physically involved in creating a product.

Predetermined Overhead Rate

A rate calculated by dividing estimated overhead costs by an allocation base, used to apply overhead to products or services.