Fact Pattern 10-4 (Questions 29-30 Apply)

question 7

Multiple Choice

Fact Pattern 10-4 (Questions 29-30 apply)
Dex and Carmen are in an auto accident.Dex offers Carmen $2,000 if she promises not to pursue her potential legal claim against Dex.Carmen agrees.Later,Carmen discovers that it will cost $1,500 to repair her car and $4,000 to cover the medical expenses for a latent injury.
-Refer to Fact Pattern 10-4.In Carmen's suit against Dex to recover her repair and medical expenses,Carmen will most likely recover

• A)half the amount to pay the costs over what Dex already paid Carmen.
• B)nothing.
• C)the estimated amount to pay those costs and any other liability.
• D)the exact amount to pay those costs and no more.

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Definitions:

Absorption Costing

A cost calculation approach encompassing all production expenses, such as direct materials, direct labor, along with both variable and fixed overhead costs, in determining the price of a product.

Unsold Units

Inventory items that have not been sold during a specific period, representing potential revenue that has not been realized.

Absorption Costing Balance Sheet

A financial statement that includes all manufacturing costs (direct labor, direct materials, and manufacturing overhead) in the value of finished goods inventory.

Variable Costing

An accounting method that considers only the variable costs directly attributable to the production of goods, excluding fixed manufacturing costs from inventory valuation.