Umbrella Insurance Company carries three major lines of insurance: auto, workers' compensation, and homeowners. The company has prepared the following report for 20Y2:

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 Rates
New policy processing ............................ $160 per new policy
Cancellation processing ........................... $240 per cancellation
Claim audits ........................................ $500 per claim audit
Claim disbursements processing ................ $120 per disbursement
Premium collection processing ................ $ 25 per premium collected
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 operating income as a percent of premium revenue, rounded to one decimal place.
d. Interpret the report.

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UMBRELLA INSURANCE COMPANY Product Profitabili y Report For the Year Ended December 31, 20Y2 Auto Premium revenue Less estimated claims Underwriting income 7,200,000 (5,040,000) 2,160,000 Compensation $ 6,500,000 4550,000) Homeowners $9,200,000 $2,760,000 1,950,000 Auto Workers'Comp. Homeowners Number of new policies Number of canceled policies Number of audited claims Number of claim disbursements Number of premiums collected 1,500 350 320 400 7,500 1,450 250 100 4,100 2,000 700 750 12,000 1,500