cong in an insurance company Umbrella Insurance Company cames three major lines of insurance auto, workers' compensation, and homeowners. The company has prepared the following report for 2012: Umbrella Insurance Company Product Profitability Report For the Year Ended December 31, 20Y2 Workers Auto Compensation Homeowners Premium revenue 57,200,000 $ 6,500,000 $ 9,200,000 Les estimated daim (5.040,000) (4,550,000) (6.440,000) Underwriting income $ 2.160,000 $1.950,000 $ 2,760,000 Management is concerned that the administrative expenses may make some of the insurance lines un profitable. However, the administrative expenses have not been located to the insurance lines. The controller nos suggested that the administrative expenses could be assigned to the insurance lines using activity-based coutingThe adeninistrative expenses are comprised of five activities. The activities and their rates are as follows: Activity Rates New policy processing 5160 per new poley Cancellation processing 1240 per cancellation Claim audits 3500 per daim audit Claim disbursements processing 5120 per disbursement Premium collection processing $25 per premium collected Activity assage data for each line of insurance were retrieved from the corporate records and are shown belon Auto Workers Comp Homeowners Number of new police 1,500 4,100 Number of canceled pe 350 250 2.000 Vy-d Costing in an Insurance Company Umbrella Insurance Company carries three major lines of insurance auto, workers' compensation, and homeowners. The company has prepared the following report for 2012 Umbrella Insurance Company Product Profitability Report For the Year Ended December 31, 2012 Workers Auto Compensation Homeowners Premium revenue $ 7,200,000 $ 6,500,000 $ 9,200,000 Less estimated claims (5,040,000) (4.550,000) (6.440,000) Underwriting income $ 2.160,000 $1,950,000 $ 2,760,000 Management is concerned 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 insurancetines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Activity Rates New policy processing $160 per new policy 5240 per cancellation Cancellation processing $500 per claim audit Claim Budits Claim disbursements processing Premium collection processing 5120 per disbursement $25 per premium collected Activity base usage data for each line of insurance were retrieved from the corporate records and are shown below Auto Workers' Comp Homeowners Number of new policies 1,500 1.450 4,100 tumber of canceled policies 350 250 2.000 Previous Woh eBook Umbrella Insurance Company Product Profitability Report For the Year Ended December 31, 20Y2 Auto Workers' Comp. Homeowners Premium revenue $7,200,000 $6,500,000 $9,200,000 Less estimated claims (5,040,000) (4,550,000) (6,440,000) Underwriting income $2,160,000 $1,950,000 $2,760,000 Administrative activities: New policy processing 160X Cancellation processing 240 X Claim audits 500 X Claim disbursements processing 120 X Premium collection processing Total administrative expenses 0 x Operating Income
