Asked by Mikayla Muller on Jun 22, 2024
Verified
Giant Motor Car Co. is in the business of automobile manufacturing and parts assembly. It uses a Just-In-Time inventory system, which greatly reduces inventory costs. The only difficulty, however, is that it leaves Giant somewhat vulnerable to supply stoppages. Giant has only 48 hours of raw materials inventory at any given time.
A) Giant has an insurable interest in maintaining inventory supply.
B) Giant could obtain insurance against a strike at the plant of a parts supplier.
C) Giant could obtain life insurance for its inventory scheduler.
D) All of the responses are correct.
Just-In-Time
A management strategy that aligns raw-material orders from suppliers directly with production schedules to reduce inventory costs.
Insurable Interest
A stake or a legal right in the preservation of an item, person, or property that allows an individual or entity to obtain insurance coverage against loss or damage.
Supply Stoppages
Interruptions or halts in the provision or delivery of goods and services, often due to disputes, logistics issues, or external factors.
- Acquire an understanding of the notion of insurable interest and its critical role in the context of an insurance policy.
Verified Answer
TH
Tiffany HoppesJun 29, 2024
Final Answer :
D
Explanation :
A) Giant has an insurable interest in maintaining inventory supply because disruptions can lead to significant financial losses. B) Insurance against a strike at a parts supplier's plant is feasible because it directly affects Giant's operations. C) Obtaining life insurance for key employees, such as the inventory scheduler, is a common practice to mitigate the risk associated with the potential loss of crucial personnel.
Learning Objectives
- Acquire an understanding of the notion of insurable interest and its critical role in the context of an insurance policy.