nstructions Statewide Insurance Company has a process for making payments on insurance claims as follows: Receiving Claim Adjusting | Paying Claim Claim An activity analysis revealed that the cost of these activities was as follows: Receiving claim 2Adjusting claim s Paying claim 4 Total $91,800.00 56,400.00 91,800.00 540,000.00 This process includes only the cost of processing the claim payments, not the actual amount of the claim payments. The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted The process received, adjusted, and paid 3,600 claims during the period. All claims were treated identically in this process. To improve the cost of this process, management has determined that claims should be segregated into two categories. Claims under $1,000 and claims greater than $1,000: claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim. Claims above $1,000 would be adjusted. It is estimated that 70% o the claims are under $1,000 and would thus be paid without adiustment t is as would add 10% to the "receiving claim" activity cost. estimate hathe additional e or se e a claims Required a. Develop a table showing the percent of individual activity cost to the total process cost. b. Determine the average total process cost per claim payment, assuming 3,600 total claims. c. Prepare a table showing the changes in the activity costs as a result of the changes proposed by management. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If an amount is zero. enter"O". d. Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 3,600 total claims. Round the final answer to the nearest cent Starting Question a. Develop a table showing the percent of individual activity cost to the total process cost Percent of Total AcivityCost Process ost Activities 2 Receiving claims 3Adjusting claim 4 Paying claim $91,800.00 356,400.00 91,800.00 5 Total $540,000.00 Additional Questions b. Determine the average total process cost per claim payment, assuming 3,600 total claims. per paid claim c. Prepare a table showing the changes in the activity costs as a result of the changes proposed by management. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If an amount is zero, enter "o". Activity CostActivity Cost Activity Cost Saving Activities Prior to After Improvement Improvement 2 Receiving claims 3 Adjusting claim 4 Paying claim $91,800.00 356,400.00 91,800.00 $540,000.00 Total Final Question d. Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 3,600 total claims. Round the final answer to the nearest cent. per paid claim
