Case 07-8 Hurricane William Euker Corporation (Euker) has a manufacturing plant and sales office in the Gulf Coast Region. The damage caused by Hurricane William (Hurricane), a Category 5 hurricane, has rendered Euker’s manufacturing plant inoperable and has also forced Euker to rent temporary office space in Houston to accommodate its sales force. Euker will continue to make fixed monthly lease payments for idle (but otherwise operable) machinery in the plant. Additionally, the processing volume for Euker’s shared service center in Denver is down 40% as a result of the shut down of the manufacturing plant. Euker allocates the cost of the shared service center on a volume basis and consequently a related unfavorable volume variance exists. Euker’s legal counsel has determined that under Euker’s property and casualty insurance policy, Euker is entitled to insurance recovery for the fair value of the manufacturing plant in excess of the deductible, and that such recovery is probable. Required:
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manufacturing plant, business interruption insurance, Euker, interruption insurance policy