Homework Help is Here – Start Your Trial Now!
Business
Accounting
Statewide Insurance Company has a process for making payments on insurance claims as follows: Receiving Clalm Adjusting Claim Paying Clalm An activity analysis revealed that the cost of these activities was as follows: Receiving claim $62,500 Adjusting claim 137,500 Paying claim 50,000 Total $250,000 This process includes only the cost of processing the claim payments, not the actual amount of the claim payments. The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted. The process received, adjusted, and paid 5,000 claims during the period. All claims were treated identically in this process. To improve the cost of this process, management has determined that claims should be segregated into two categories. Claims under $1,000 and claims greater than $1,000: claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim. Claims above $1,000 would be adjusted. It is estimated that 65% of the claims are under $1,000 and would thus be paid without adjustment. It is also estimated that the additional effort to segregate claims would add 15% to the "receiving claim" activity cost. a. Develop a table showing the percent of individual activity cost to the total process cost. Round the percents to the nearest whole number, if required. Statewide Insurance Company Individual activity c ost to the total precess coct

Statewide Insurance Company has a process for making payments on insurance claims as follows: Receiving Clalm Adjusting Claim Paying Clalm An activity analysis revealed that the cost of these activities was as follows: Receiving claim $62,500 Adjusting claim 137,500 Paying claim 50,000 Total $250,000 This process includes only the cost of processing the claim payments, not the actual amount of the claim payments. The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted. The process received, adjusted, and paid 5,000 claims during the period. All claims were treated identically in this process. To improve the cost of this process, management has determined that claims should be segregated into two categories. Claims under $1,000 and claims greater than $1,000: claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim. Claims above $1,000 would be adjusted. It is estimated that 65% of the claims are under $1,000 and would thus be paid without adjustment. It is also estimated that the additional effort to segregate claims would add 15% to the "receiving claim" activity cost. a. Develop a table showing the percent of individual activity cost to the total process cost. Round the percents to the nearest whole number, if required. Statewide Insurance Company Individual activity c ost to the total precess coct

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

(10) Mfg: I need help with C and D

b. Determine the average total process cost per claim payment, assuming 5,000 total claims. Round to the nearest whole dollar. 2$ 50 per paid claim Feedback Check My Work b. A process activity analysis can be used to determine the per unit cost of a claim based on the total costs of all of the activities involved in processing each claim. c. Prepare a table showing the changes in the activity costs as a result of the changes proposed by management. If an amount is zero, leave the entry box blank. Use the minus sign to indicate an additional cost in the last column. Statewide Insurance Company Changes in the activity costs Activity Cost After Improvement Activity Cost Prior Activity Cost Activities to Improvement Saving Receiving claim $ 62,500 71,875 -9,375 Adjusting claim 137,500 48,125 V 89,375 Paying claim 50,000 82,500 -32,500 Totals 2$ 250,000 47,500 X Feedback V Check My Work c. Management can use process activity analysis to improve a process. How does the change that management proposes improve efficiency or eliminate unnecessary activities? Determine the difference between the costs of Requirement (a) and the claim activities after the changes. d. Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 5,000 total claims. Round to the nearest cent. per paid claim
Transcribed Image Text:b. Determine the average total process cost per claim payment, assuming 5,000 total claims. Round to the nearest whole dollar. 2$ 50 per paid claim Feedback Check My Work b. A process activity analysis can be used to determine the per unit cost of a claim based on the total costs of all of the activities involved in processing each claim. c. Prepare a table showing the changes in the activity costs as a result of the changes proposed by management. If an amount is zero, leave the entry box blank. Use the minus sign to indicate an additional cost in the last column. Statewide Insurance Company Changes in the activity costs Activity Cost After Improvement Activity Cost Prior Activity Cost Activities to Improvement Saving Receiving claim $ 62,500 71,875 -9,375 Adjusting claim 137,500 48,125 V 89,375 Paying claim 50,000 82,500 -32,500 Totals 2$ 250,000 47,500 X Feedback V Check My Work c. Management can use process activity analysis to improve a process. How does the change that management proposes improve efficiency or eliminate unnecessary activities? Determine the difference between the costs of Requirement (a) and the claim activities after the changes. d. Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 5,000 total claims. Round to the nearest cent. per paid claim
Process Activity Analysis for a Service Company Statewide Insurance Company has a process for making payments on insurance claims as follows: Receiving Claim Adjusting Claim Paying Claim An activity analysis revealed that the cost of these activities was as follows: Receiving claim $62,500 Adjusting claim 137,500 Paying claim 50,000 Total $250,000 This process includes only the cost of processing the claim payments, not the actual amount of the claim payments. The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted. The process received, adjusted, and paid 5,000 claims during the period. All claims were treated identically in this process. To improve the cost of this process, management has determined that claims should be segregated into two categories. Claims under $1,000 and claims greater than $1,000: claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim. Claims above $1,000 would be adjusted. It is estimated that 65% of the claims are under $1,000 and would thus be paid without adjustment. It is also estimated that the additional effort to segregate claims would add 15% to the "receiving claim" activity cost. a. Develop a table showing the percent of individual activity cost to the total process cost. Round the percents to the nearest whole number, if required. Statewide Insurance Company Individual activity cost to the total process cost Percent of Activities Activity Cost Total Process Receiving claim $ 62,500 25 % Adjusting claim 137,500 % 55 Paying claim 50,000 20 % Total 250,000 100
Transcribed Image Text:Process Activity Analysis for a Service Company Statewide Insurance Company has a process for making payments on insurance claims as follows: Receiving Claim Adjusting Claim Paying Claim An activity analysis revealed that the cost of these activities was as follows: Receiving claim $62,500 Adjusting claim 137,500 Paying claim 50,000 Total $250,000 This process includes only the cost of processing the claim payments, not the actual amount of the claim payments. The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted. The process received, adjusted, and paid 5,000 claims during the period. All claims were treated identically in this process. To improve the cost of this process, management has determined that claims should be segregated into two categories. Claims under $1,000 and claims greater than $1,000: claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim. Claims above $1,000 would be adjusted. It is estimated that 65% of the claims are under $1,000 and would thus be paid without adjustment. It is also estimated that the additional effort to segregate claims would add 15% to the "receiving claim" activity cost. a. Develop a table showing the percent of individual activity cost to the total process cost. Round the percents to the nearest whole number, if required. Statewide Insurance Company Individual activity cost to the total process cost Percent of Activities Activity Cost Total Process Receiving claim $ 62,500 25 % Adjusting claim 137,500 % 55 Paying claim 50,000 20 % Total 250,000 100
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS