Fact Pattern 14-A1 (Questions A2-A3 Apply)

question 39

Multiple Choice

Fact Pattern 14-A1 (Questions A2-A3 apply)
Linea,an employee of Hard Labor Industries (HLI) ,is injured in a work-related accident.Based on the diagnosis of Newt,a doctor,Linea accepts $50,000 from HLI and waives the right to future claims.Newt's diagnosis later proves to have been wrong.
-Refer to Fact Pattern 14-A1.In terms of the impact on Linea's agreement with HLI,Newt's misdiagnosis is

• A)a mistake of fact.
• B)an expert's puffery.
• C)innocent misrepresentation.
• D)negligent misrepresentation.

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Definitions:

Machine-Hours

A measure of production activity that represents the hours machines are operating to manufacture products.

Job-Order Costing System

An accounting system that calculates the cost of individual jobs or batches in manufacturing or service sectors, tracking direct materials, direct labor, and overhead per job.

Predetermined Overhead Rate

An estimated rate used to apply manufacturing overhead to products or job orders, calculated before a period begins based on expected costs and activity levels.

Traditional Costing System

A method of cost accounting that allocates factory overhead to products based on volume-driven measures such as machine hours or labor hours.