Activity-Based Costing for a Service Company Bounce Back Insurance Company carries three major lines of insurance: auto, workers' compensation, and homeowmers. The company has prepared the rollowing report: Management is concemed that the administrotive expenses may make some of the insurance ines unprontabie. However, the administrathe expenses have hot been allocated to the insurance lines. The controlier has suggested that the acmin strative expenses could be assigned to the zhsurance inea using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: tanagement is concerned that the administrative expenses may make some of the insurance anes unprofitable. However, the administrative experises have ot been allocated to the insurance lines. The controlier has suggested that the administrative expenses could ba assigned to the insurance ines using ctivity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Utivity-bose usage data for each line of insurance were retrieved from the corporate records as follows: a. Complete the product profitabiity report through the administrotive activities, Determine the operating inceme as a pereent or prem um revenue- a. Complete the product profitability report through the administrative activities. Determine the operoting income as o percent of premium revenue. Rounded to the nearest whole percent. All three insurance lines have in the way they consume has percentage of underwriting income to premiutn revenue. The differences among the insurance lines are activities. The profitabily because it and frequent claims that require more auditing and disbursement processing than do the other two lines In addition, the Homeowners line has a much higher rote of canceliation relative to the other two ines (over 50% of ghaw policies), Lastly, the Homeowners line has more premium collections compared to the other two fines. Possfoly, the Hameowners line is collected in smailer amounts from more customers than the other two lines. In contrast, the line consumes the administrative activities, cousing it to be very profitable. The Auto line is in between these two