An auto insurance company is implementing a new bonus system. In each month, if a policyholder does not have an accident, he or she will receive a 6.00 cash- back bonus from the insurer. Among the 1,000 policyholders of the auto insurance company, 3500 are classified as low-risk drivers and 650 are classified as high-risk drivers. In each month, the probability of zero accidents for high-risk drivers is .75 and the probability of zero accidents for low-risk drivers is .90. Calculate the expected bonus payment from the insurer to the 1,000 policyholders in one year.
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- A company sells flood insurance to homeowners for $230 per year. It estimates there is a 1.2% chance of any house flooding in a year. When a house floods, the company's average payout is $17,600 (though the company keeps the $230 in any case). What is the company's expectation for each policy sold?A company has a property insurance policy with the annual premium of $1330. In recent months, the company has filed four different claims against the policy of fire to burglaries and vandalism incident. The insurance company has left to cancel the policy, which has been in effect for 330 days. What is the regular refund due in dollars to the company round your answer to the nearest cent?A company has a property insurance policy with an annual premium of $1130. And recent months the company is filed for different claims against the policy of fire two burglaries and ev vandalisman incident. The insurance company has elected to cancel the policy, which is been in effect for 330 days. What is the regular refund due in dollars to the company round your answer to the nearest cent?
- A company has a property insurance policy with an annual premium of $1,360. In recent months, the company has filed four different claims against the policy: a fire, two burglaries, and a vandalism incident. The insurance company has elected to cancel the policy, which has been in effect for 320 days. What is the regular refund due (in $) to the company? (Round your answer to the nearest cent.)Next week, Super Discount Airlines has a flight from New York to Los Angeles that will be booked to capacity. The airline knows from past history that an average of 25 customers (with a standard deviation of 15) cancel their reservation or do not show for the flight. Revenue from a ticket on the flight is $125. If the flight is overbooked, the airline has a policy of getting the customer on the next available flight and giving the person a free round-trip ticket on a future flight. The cost of this free round-tripticket averages $250. Super Discount considers the cost of flying the plane from New York to Los Angeles at a sunk cost. By how many seats should Super Discount overbook the flight?Prydain Pharmaceuticals is reviewing its employee healthcare program. Currently, the company pays a fixed fee of$300 per month for each employee, regardless of the number or dollar amount of medical claims filed. Anotherhealth-care provider has offered to charge the company$100 per month per employee and $30 per claim filed. Athird insurer charges $200 per month per employee and$10 per claim filed. Which health-care program should Prydain join? How would the average number of claimsfiled per employee per month affect your decision?
- On the last day of the fiscal year, a co-worker asks you to cut a check for $2,000 as a miscellaneous expense for supplies in order to complete a project for a VIP customer today. You notice the invoice looks a little different from other invoices that are usually processed. You know that by preparing the closing entries tomorrow, the miscellaneous expense will be set to zero for the beginning of the year. Minimum of 175 words Should you write this check today and record the expense or write the check tomorrow? How would the company be affected if the check is written and the invoice ends up being erroneous?Trust is an insurance company and it has 10000 cars insured for crash accident. The company's record for the past 10 years shows that on average 3% of cars have crashed each year. Compute the expected number of cars to be crashed per year? What is the objective risk of Trust company? Assume that birr 500000 is the amount of compensation payments Trust will cover for the insured if accident happened, what is the maximum and minimum amount of birr Trust company is expected to pay?Porter Insurance Company has three lines of insurance: automobile, property, and life. The life insurance segment has been losing money for the past five quarters, and Leah Harper, Porters controller, has done an analysis of that segment. She has discovered that the commission paid to the agent for the first year the policy is in place is 55 percent of the first-year premium. The second-year commission is 20 percent, and all succeeding years a commission equal to 5 percent of premiums is paid. No salaries are paid to agents; however, Porter does advertise on television and in magazines. Last year, the advertising expense was 500,000. The loss rate (payout on claims) averages 50 percent. Administrative expenses equal 450,000 per year. Revenue last year was 10,000,000 (premiums). The percentage of policies of various lengths is as follows: Experience has shown that if a policy remains in effect for more than two years, it is rarely cancelled. Leah is considering two alternative plans to turn this segment around. Plan 1 requires spending 250,000 on improved customer claim service in hopes that the percentage of policies in effect will take on the following distribution: Total premiums would remain constant at 10,000,000, and there are no other changes in fixed or variable cost behavior. Plan 2 involves dropping the independent agent and commission system and having potential policyholders phone in requests for coverage. Leah estimates that revenue would drop to 7,000,000. Commissions would be zero, but administrative expenses would rise by 1,200,000, and advertising (including direct mail solicitation) would increase by 1,000,000. Required: 1. Prepare a variable-costing income statement for last year for the life insurance segment of Porter Insurance Company. 2. What impact would Plan 1 have on income? 3. What impact would Plan 2 have on income?
- Porter Insurance Company has three lines of insurance: automobile, property, and life. The life insurance segment has been losing money for the past five quarters, and Leah Harper, Porters controller, has done an analysis of that segment. She has discovered that the commission paid to the agent for the first year the policy is in place is 55 percent of the first-year premium. The second-year commission is 20 percent, and all succeeding years a commission equal to 5 percent of premiums is paid. No salaries are paid to agents; however, Porter does advertise on television and in magazines. Last year, the advertising expense was 500,000. The loss rate (payout on claims) averages 50 percent. Administrative expenses equal 450,000 per year. Revenue last year was 10,000,000 (premiums). The percentage of policies of various lengths is as follows: Experience has shown that if a policy remains in effect for more than two years, it is rarely cancelled. Leah is considering two alternative plans to turn this segment around. Plan 1 requires spending 250,000 on improved customer claim service in hopes that the percentage of policies in effect will take on the following distribution: Total premiums would remain constant at 10,000,000, and there are no other changes in fixed or variable cost behavior. Plan 2 involves dropping the independent agent and commission system and having potential policyholders phone in requests for coverage. Leah estimates that revenue would drop to 7,000,000. Commissions would be zero, but administrative expenses would rise by 1,200,000, and advertising (including direct mail solicitation) would increase by 1,000,000. Required: 1. Assume Fred holds the policy for one year and then drops it. What is his contribution to Porters operating income? 2. Assuming Fred holds the policy for three years, what is his contribution to Porters operating income in the second and third years? Over a three-year period? What implications does this hold for Porters efforts to retain policyholders?The manager of the Danvers-Hilton Resort Hotel stated that the mean guest bill for a weekend is 600 or less. A member of the hotels accounting staff noticed that the total charges for guest bills have been increasing in recent months. The accountant will use a sample of future weekend guest bills to test the managers claim. a. Which form of the hypotheses should be used to test the managers claim? Explain. H0:600H0:600H0:=600Ha:600Ha:600Ha:600 b. What conclusion is appropriate when H0 cannot be rejected? c. What conclusion is appropriate when H0 can be rejected?Marc Associates employs Janet Evanovich at its law firm. Her gross income for June is $7,500. Payroll for the month of June follows: federal income tax of $650, state income tax of $60, local income tax of $30, FICA Social Security tax rate at 6.2%, FICA Medicare tax rate at 1.45%, health-care insurance premium of $300, donations to a charity of $50, and pension plan contribution of $200. The employee is responsible for covering 40% of his or her health insurance premium. A. Record the journal entry to recognize employee payroll for the month of June; dated June 30, 2017. B. Record remittance of the employees salary with cash on July 1.