Sarah beverages specialized in the production and distribution of a locally manufactured drink called Sobolo. She...
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Sarah beverages specialized in the production and distribution of a locally manufactured drink called "Sobolo". She has a full fire insurance cover that will compensate her in respect of building and stock during the occurrence of fire. In a particular year fire occurred in January accidentally but it will take about 11months to rebuild the structure in which production is done, 7 months to fix machines used in the production process and 6 months for production to retum to full capacity. Sarah had 10 casual workers who were paid GHS500.00 each per month but they have been laid off the month the fire occurred until full production resumed and were not paid salaries during the period. She also paid light bills and routine maintenance of GHS4000.00 per month which was also stopped until production resumed on full scale. Sarah had to pay another organization which produces similar drink GHS42000.00 every month to produce so she does not run out of business. Her turnover the year before the fire was GHS60million, Sum Assured GHS25 Million and the gross rate the previous year was 12Million. The revenue from operation before and after the fire are shown below Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Month Before Fire(GHS Million) After Fire(GHS Million) 4 4.2 4.8 6. 6.5 5.5 4.6 4.7 5.5 5.2 5 4 Nil Nil 0.8 1.2 1.5 2 2.6 3.6 4.5 5.1 3.9 a. Outline the steps you will take to calculate the amount of loss to be paid for business interruption [5 marks] b. On the basis of the steps outlined, calculate the amount payable under the policy [12 marks] c. If in future you have to present Sarah's risk for assessment for business interruption insurance, what information will you provide assuming things did not change? [3Marks] d. Explain the following terms as applied in business interruption insurance; i) Turn over ii) Indemnity period iii) Increase in cost of working iv) savings [5 Marks] Sarah beverages specialized in the production and distribution of a locally manufactured drink called "Sobolo". She has a full fire insurance cover that will compensate her in respect of building and stock during the occurrence of fire. In a particular year fire occurred in January accidentally but it will take about 11months to rebuild the structure in which production is done, 7 months to fix machines used in the production process and 6 months for production to retum to full capacity. Sarah had 10 casual workers who were paid GHS500.00 each per month but they have been laid off the month the fire occurred until full production resumed and were not paid salaries during the period. She also paid light bills and routine maintenance of GHS4000.00 per month which was also stopped until production resumed on full scale. Sarah had to pay another organization which produces similar drink GHS42000.00 every month to produce so she does not run out of business. Her turnover the year before the fire was GHS60million, Sum Assured GHS25 Million and the gross rate the previous year was 12Million. The revenue from operation before and after the fire are shown below Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Month Before Fire(GHS Million) After Fire(GHS Million) 4 4.2 4.8 6. 6.5 5.5 4.6 4.7 5.5 5.2 5 4 Nil Nil 0.8 1.2 1.5 2 2.6 3.6 4.5 5.1 3.9 a. Outline the steps you will take to calculate the amount of loss to be paid for business interruption [5 marks] b. On the basis of the steps outlined, calculate the amount payable under the policy [12 marks] c. If in future you have to present Sarah's risk for assessment for business interruption insurance, what information will you provide assuming things did not change? [3Marks] d. Explain the following terms as applied in business interruption insurance; i) Turn over ii) Indemnity period iii) Increase in cost of working iv) savings [5 Marks]
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