Process Activity Analysis for a Service Company Statewide Insurance Company has a process for making payments on insurance claims as follows: Receiving Claim Adjusting Claim Paying Claim An activity analysis revealed that the cost of these activities was as follows: Receiving claim $108,000 Adjusting claim 237,600 Paying claim 86,400 Total $432,000 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 5,400 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% of the claims are under $1,000 and would thus be paid without adjustment. It is also estimated that the additional effort to segregate claims would add 15% to the "receiving claim" activity cost. c. Prepare a table showing the changes in the activity costs as a result of the changes proposed by management. If an amount is zero, leave the entry box blank. Use the minus sign to indicate an additional cost in the last column. Statewide Insurance Company Changes in the activity costs Activities Activity Cost Prior Activity Cost to Improvement After Improvement 108.000 124,200 Activity Cost Saving Receiving claim Adjusting claim 237,600 308,880 x Paying claim 86,400 Totals 432,000 Feedback Check My Wors c. Management can use process activity analysis to improve a process. How does the change that management proposes improve efficiency or eliminate unnecessary activities? Determine the difference between the costs of Requirement (a) and the claim activities after the changes. d. Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 5,400 total claims. Round to the nearest cent. per paid claim