The standard cost of product 5252 includes 1.90 hours of direct labor at $14.00 per hour. The predetermined overhead rate is $22

Answer:

The answer to the question is A.

Explanation:

To start, we differentiate between fixed and variable elements:

Fixed costs:

Advertising costs $20,000

Office costs $12,000

Other expenses $10,000

Variable costs:

Delivery costs $25,000

Commission costs $75,000

Other variable costs $20,000

Total amount $120,000

Next, we find the ratio of variable costs to total sales:

Total selling expense ratio = 120,000/2,500,000 = 0.048

For each of the variable costs:

Delivery costs = 25,000/120,000 = 0.20

Commission costs = 75,000/120,000 = 0.63

Other variable costs = 20,000/120,000 = 0.17

Lastly, for sales amounting to $3,400,000:

Total variable cost = 3,400,000 * 0.048 = $163,200

Commissions = 0.63 * 163,200 = $102,816

Complete Question:

James Stilton serves as the CEO of RightLiving, Inc., a corporation that purchases life insurance policies at a reduced price from terminally ill individuals and sells them to investors. RightLiving compensates terminally ill patients with a percentage of the future death benefits (typically 65%) and subsequently sells the policies to investors for 85% of the future benefit amount. The patients receive funds to assist with their medical and other expenses, while the investors are assured a positive return on their investments. The difference between the purchase and retail prices represents RightLiving's profit.

Stilton is aware that some sick patients might acquire insurance policies through deceit (by concealing their illness on the application). If an insurance company uncovers such fraud, it will annul the policy and withhold payment. While Stilton is confident that most of the policies he has acquired are legitimate, he recognizes that a few may not be.

Requirement:

What additional ethical dilemmas might Stilton encounter?

Answer with Explanation:

Stilton's ethical challenges include:

• Should he disclose potential fraud to investors prior to executing sales?
• What policies should be established to ensure that legitimate individuals can easily sell their policies, and how would lack of such policies be unfair for RightLiving, Inc.?
• Stilton also faces ethical issues because the business model benefits from the early deaths of clients, which raises moral questions.