Southern Seaside Insurance Company estimates that its overhead costs for policy administration should be $100 for each
Question:
Southern Seaside Insurance Company estimates that its overhead costs for policy administration should be $100 for each new policy obtained and $5 per year for each $1,500 face amount of insurance outstanding. The company set a budget of 5,000 new policies for the coming period. In addition, the company estimated that the total face amount of insurance outstanding for the period would equal $12,000,000.
During the period, actual costs related to new policies amounted to $495,000. A total of 4,800 new policies were obtained.
The cost of maintaining existing policies was $55,000. The company actually had $14,000,000 in policies outstanding during the period. Prepare a schedule to indicate the differences between a master production budget and actual costs for this operation.
Step by Step Answer:
Managerial Accounting An Introduction to Concepts Methods and Uses
ISBN: 978-0324639766
10th Edition
Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil