Safety First Insurance Company carries three major lines of insurance auto, workers compensation, and homeowners The company has prepared the following report Safety First Insurance Company Product Profitability Report For the Year Ended December 31 1 Auto Workers Compensation Homeowners 2 Premium revenue $5,750,000 00 $6,240,000 00 $8,160,000 00 3 Estimated claims 4,312,500 00 4,680,000 00 6,120,000 00 4 Underwriting income $1,437,500 00 $1,560,000 00 $2,040,000 00 5 Underwriting income as a percent 6 of premium revenue 25 0 25 0 25 0 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 insurance lines using activity based costing The administrative expenses are comprised of five activities The activities and their rates are as follows Activity Activity Rates New policy processing $120 per new policy Cancellation processing $175 per cancellation Claim audits $320 per claim audit Claim disbursements processing $104 per disbursement Premium collection processing $24 per premium collected Activity base usage data for each line of insurance were retrieved from the corporate records and follows Auto Workers Homeowners Compensation Number of new policies 1,320 1,500 4,080 Number of canceled policies 480 240 2,160 Number of audited claims 385 120 960 Number of claim disbursements 480 216 840 Number of premiums collected 8,400 1,800 15,000 Required a Complete the product profitability report through the administrative activities Determine the income from operations as a percent of premium revenue, round percentages to the one decimal place Refer to the Labels and Amount Descriptions for exact wording of text entries Be sure to complete the statement heading Enter all amounts as positive numbers, except for a negative income from operations b Interpret the report Labels Administrative activities December 31 For the Year Ended December 31 Amount Descriptions Cancellation processing Claim audits Claim disbursements processing Estimated claims Income from operations New policy processing Premium collection processing Premium revenue Total administrative expenses Underwriting income

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Safety First Insurance Company carries three major lines of insurance: auto, workers compensation, and homeowners. The company has prepared the following report: Safety First Insurance

Safety First Insurance Company carries three major lines of insurance: auto, workers compensation, and homeowners. The company has prepared the following report:

Safety First Insurance Company

Product Profitability Report

For the Year Ended December 31

1		Auto	Workers Compensation	Homeowners
2	Premium revenue	$5,750,000.00	$6,240,000.00	$8,160,000.00
3	Estimated claims	4,312,500.00	4,680,000.00	6,120,000.00
4	Underwriting income	$1,437,500.00	$1,560,000.00	$2,040,000.00
5	Underwriting income as a percent
6	of premium revenue	25.0%	25.0%	25.0%

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 insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows:

Activity	Activity Rates
New policy processing	$120 per new policy
Cancellation processing	$175 per cancellation
Claim audits	$320 per claim audit
Claim disbursements processing	$104 per disbursement
Premium collection processing	$24 per premium collected

Activity-base usage data for each line of insurance were retrieved from the corporate records and follows:

	Auto	Workers	Homeowners
	Auto	Compensation	Homeowners
Number of new policies	1,320	1,500	4,080
Number of canceled policies	480	240	2,160
Number of audited claims	385	120	960
Number of claim disbursements	480	216	840
Number of premiums collected	8,400	1,800	15,000

	Required:
a.	Complete the product profitability report through the administrative activities. Determine the income from operations as a percent of premium revenue, round percentages to the one decimal place. Refer to the Labels and Amount Descriptions for exact wording of text entries. Be sure to complete the statement heading. Enter all amounts as positive numbers, except for a negative income from operations.
b.	Interpret the report.

Labels
Administrative activities
December 31
For the Year Ended December 31
Amount Descriptions
Cancellation processing
Claim audits
Claim disbursements processing
Estimated claims
Income from operations
New policy processing
Premium collection processing
Premium revenue
Total administrative expenses
Underwriting income