Question

Umbrella Insurance Company carries three major lines of insurance: auto, workers’ compensation, and homeowners. The company has prepared the following report for 2013:


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-base usage data for each line of insurance were retrieved from the corporate records and are shown below.


a. Complete the product profitability report through the administrative activities.
b. Determine the underwriting income as a percent of premium revenue.
c. Determine the income from operations as a percent of premium revenue, rounded to one decimal.
d. Interpret thereport.


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  • CreatedFebruary 04, 2014
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