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 For the Year Ended December 31 Auto Workers' Compensation Homeowners Premium revenue $5,800,000 $5,250,000 $8,200,000 Estimated claims (4,060,000) (4,375,000) (5,740,000) Underwriting income $1,740,000 $1,875,000 $2,460,000 Underwriting income as a percent of 30% 30% 30% premium revenue Management is concemed that the administrative expenses may make some of the insurance lines unprofitable. 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 New policy processing Cancellation processing Claim audits Activity Rates $110 per new policy $180 per cancellation $330 per claim audit