Arthur is driving home from work when he runs off the road and hits a telephone pole. These are the losses he suffers: $12,000 to repair the damage to his car, and, $800 to rent a car while his car is being repaired. What is the correct name for each of these losses?
A) The $12,000 is an indirect loss, and the $800 is a direct loss.
B) The $12,000 is a direct loss, and the $800 is also a direct loss.
C) The $12,000 is a direct loss, and the $800 is an indirect loss.
D) The total loss of $12,800 is a direct loss.

Question

Quizplus · Accepted Answer

The $12,000 to repair the car is a direct loss because it directly results from the accident. The $800 rental car expense is an indirect loss because it is a secondary expense incurred due to the primary loss (the damaged car).

Arthur Is Driving Home from Work When He Runs Off