For the Year Ended December 31Premium revenueEstimated claimsUnderwriting income.Underwriting income as a percent ofpremium revenueActivityNew policy processingCancellation processingClaim auditsClaim disbursements processingPremium collection processingNumber of new policiesNumber of canceled policiesNumber of audited claimsNumber of claim disbursementsNumber of premiums collectedAuto$5,800,000(4,060,000)$1,740,000Management is concerned that the administrativexpenses may make some of the insurance linesnprofitable. However, the administrative expenses havenot been allocated to the insurance lines. The controllerhas suggested that the administrative expenses could beassigned to the insurance lines using activity-basedcosting. The administrative expenses are comprised offive activities. The activities and their rates are asfollows:AutoPremium revenueEstimated claimsUnderwriting incomeAdministrative activities:New policy processing1,3304903904708,50030%Activity-base usage data for each line of insurance wereretrieved from the corporate records as follows:Activity Rates$110 per new policy$180 per cancellation$330 per claim audit$100 per disbursement.$25 per premium collectedWorkers'Compensation$6,250,000(4,375,000)$1,875,000$$30%Workers'Compensation1,4003001102201,900Bounce Back Insurance CompanyProduct Profitability ReportFor the Year Ended December 31a. Complete the product profitability report through theadministrative activities. Determine the operatingincome as a percent of premium revenue. Rounded tothe nearest whole percent.AutoHomeownersHomeowners$8,200,000(5,740,000)$2,460,000Workers'Comp.4,1002,20095085015,200$30%Homeowners

Profit is the amount of revenue that remains after accounting for all expenses, debts and other…

Premium revenue Estimated claims For the Year Ended December 31 Workers' Compensation $6,250,000 (4,375,000) $1,875,000 Underwriting income Underwriting income as a percent of premium revenue Activity New policy processing Cancellation processing Auto Claim audits Claim disbursements processing Premium collection processing $5,800,000 (4,060,000) $1,740,000 30% 30% Management is concerned that the administrative penses may make some of the insurance lines nprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could be assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Activity Rates $110 per new policy $180 per cancellation $330 per claim audit $100 per disbursement $25 per premium collected Homeowne $8,200,00 (5,740,00 $2,460,00 3C Activity-base usage data for each line of insurance were

Premium revenue Estimated claims For the Year Ended December 31 Workers' Compensation $6,250,000 (4,375,000) $1,875,000 Underwriting income Underwriting income as a percent of premium revenue Activity New policy processing Cancellation processing Auto Claim audits Claim disbursements processing Premium collection processing $5,800,000 (4,060,000) $1,740,000 30% 30% Management is concerned that the administrative penses may make some of the insurance lines nprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could be assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Activity Rates $110 per new policy $180 per cancellation $330 per claim audit $100 per disbursement $25 per premium collected Homeowne $8,200,00 (5,740,00 $2,460,00 3C Activity-base usage data for each line of insurance were

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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