Activity-Based Costing for a Service Company Bounce Back Insurance Company carries three major lines of insurance: auto, workers' compensation, and homeowners. The company has prepared the following report: Bounce Back Insurance Company Product Profitability Report Maragement is concemed that the administratlve evpenses mav make some of the insurance lines unprofitabie. Howevec, the admainiatrative expenses have not been allocated to the insurance lines. The controller has sugoested that the administrative expanses could be assigned to the insiarame lines using activiby-based costing. The administrative ecpenges are compriaed of five activities. The activities and theile rates art as tollowsi: Print Mem have not been allocated to the insurance lines. The controller has suggested that the administrative expenses cotild be issigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities, The activities and their rites are as folfows: Activity bage usage data for each line of insurance were retrieved froes the corporate records as followsi: Rounded to the neverest whole giercant. b. Interpret the report. All three insurance lines have percentage of underwiting income to premium revenue. The differencen among the insuranice lines are in the way they consume activities: The insurance line has the profitability because it has frequent daims that require more auditing and dishursement processing than do the other two lines. In addition, the Homeowners line has a much higher rate of cancellation relative to the other two lines (over 50 os of neiy policies). Laitiy, the Homeowners line has more premiurn collections compared to the other two lines. Possibly, the Hiomeowners lini is collected in smaller amounts from more customers than the other two linfis. In contrast, the line consurnts the administrative activities, causing it to be very profitable. The Auto line is in between these two