1. Discuss some of the alternatives and factors that Greg Greg charges the project team to begin work on the secon should consider when developing the expense allocation phase of the project, which is to use the expense allocation system. What are some of the costs and benefits of process to begin to develop activity-based costs. As an the alternatives? initial step, the team reviews the information provided on 2. As shown in Table 1, Panel C, AXE Life is allocating the activities performed by each of the functions as shown all expenses of all departments to products. Are there in Table 2, Panel D, and categorizes the activities as unit, any potential problems caused by allocating all expenses batch, product, and facility. to products? Review the basis for the expense allocations under the 7. Activities can be categorized as unit, batch, product, and 3. current system (Table 1, Panel D) and identify functional facility. Provide the definitions of each of these categories and then use the information in Table 2, Panel D, to centers that are using expense allocation bases that may be inconsistent with the activities that drive costs for categorize the activities as unit, batch, product, or facilit that function. Using the information provided, suggest 8. As its next step, the team gathers information in Table changes to the expense allocations for each function. 5 and calculates a rate for each of the functions based on "Table 2 shows the results of the test month of the first the associated volumes. Use the information in Table 5 iteration for the system. Greg has confirmed that all to calculate cost rates for the functions identified. Is this expenses were allocated. Review the expense allocations information sufficient for decision making? Why or why not? used in the first test and discuss the functional centers in Referring back to his discussion with the chief actuary which the expense allocation bases have been improved Greg identifies two activities to begin developing activity and those that still may need improvement. based costs: the cost to issue life insurance products and 5. "Table 4 shows the cost centers for the Life Insurance the cost to service them. The project team defines the Projects functional center and a description of the activities encompassing the cost to issue a policy as the co activities in each cost center that make up that functional to receive and process applications, underwrite policies and center. Based on this information, is the proposed basis print, and collate and mail policies (termed "issuance"). The cost to maintain policies is defined as the cost of storing for allocating expenses for these cost centers accurate? Why? How could it be improved? policy information, updating policy information as neede . Discuss the steps Greg should take to complete the responding to requests for service on insurance policies, project and then maintain the expense allocation the payment of claims and benefits, and the associated process going forward. Based on the data provided, what computer costs. additional steps can be taken to improve the product expense allocation process at AXE Life