Based on IMA educational case study, Production Costs: Application in an insurance company, by: Scott McGregor , Western Connecticut State University. ISSN- 1q940-204X.

Vol 7, No 3, Article 1 September 2014

ASSIGNMENT 1. Discuss some of the alternatives and factors that Greg should consider when developing the expense allocation system. What are some of the costs and benefits of the alternatives? 2. As shown in Table 1, Panel C, AXE Life is allocating all expenses of all departments to products. Are there any potential problems caused by allocating all expenses to products? 3. Review the basis for the expense allocations under the current system (Table 1, Panel D) and identify functional centers that are using expense allocation bases that may be inconsistent with the activities that drive costs for that function. Using the information provided, suggest changes to the expense allocations for each function. Table 2 shows the results of the test month of the first iteration for the system. Greg has confirmed that all expenses were allocated. Review the expense allocations used in the first test and discuss the functional centers in which the expense allocation bases have been improved and those that still may need improvement. 5. Table 4 shows the cost centers for the Life Insurance Projects functional center and a description of the activities in each cost center that make up that functional center. Based on this information, is the proposed basis for allocating expenses for these cost centers accurate? Why? How could it be improved? 6. Discuss the steps Greg should take to complete the project and then maintain the expense allocation process going forward. Based on the data provided, what additional steps can be taken to improve the product expense allocation process at AXE Life