A Manufacturing Company Prepays Its Insurance Coverage for a Three-Year

question 39

Multiple Choice

A manufacturing company prepays its insurance coverage for a three-year period.The premium for the three years is $2,700 and is paid at the beginning of the first year.Eighty percent of the premium applies to manufacturing operations and 20% applies to selling and administrative activities.What amounts should be considered product costs and period costs respectively for the first year of coverage?
$\begin{array}{|l|r|r|}\hline & \text { Product Costs } & \text { Period Costs } \\\hline \text { A) } & \$ 2,700 & \$ 0 \\\hline \text { B) } & \$ 2,160 & \$ 540 \\\hline \text { C) } & \$ 1,440 & \$ 360 \\\hline \text { D) } & \$ 720 & \$ 180 \\\hline\end{array}$

• A) Option A
• B) Option B
• C) Option C
• D) Option D

---

Definitions:

Control Circuit

A section of an electrical system that indirectly determines the operational state of another circuit's main power control.

Inhibit

To prevent or restrict the operation or action of a device, system, or process, often through a control signal or mechanism.

Enable

To activate or allow a system or device to operate, often controlled by an electronic or mechanical switch.

Three-Wire

A wiring system that consists of a phase wire, a neutral wire, and a protective ground wire, commonly used in residential and commercial settings.