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morpeh [17]
3 years ago
8

Devern Assurance Company provides both property and automobile insurance. The projected income statements for the two products a

re as follows: Property Insurance Automobile Insurance Sales $4,200,000 $12,000,000 Less variable expenses 3,830,000 9,600,000 Contribution margin $370,000 $2,400,000 Less direct fixed expenses 400,000 500,000 Segment margin $(30,000) $1,900,000 Less common fixed expenses (allocated) 100,000 200,000 Operating income (loss) $(130,000) $1,700,000 The president of the company is considering dropping the property insurance. However, some policyholders prefer having their property and automobile insurance with the same company, so if property insurance is dropped, sales of automobile insurance will drop by 12 percent. No significant non-unit-level activity costs are incurred.
1. As a supporting computation, prepare a segmented income statement for the keep-or-drop decision.

2.Assume that dropping all advertising for the property insurance line and increasing the corporate advertising budget by $450,000 will increase sales of property insurance by 10 percent and automobile insurance by 8 percent. Prepare a segmented income statement that reflects the effect of increased advertising.
Business
1 answer:
Jobisdone [24]3 years ago
6 0

Answer:

Explanation:

Severn Assurance company.

Decision to drop the Assurance division will result in the below group financials:

Property division:

Sales 10,560,000

Variable expense 8,448,000

Contribution Margin 2,112,000

Direct Fixed Expense 500,000

Segment Margin 1,612,000

Common fixed expense 300,000

Operating income $1,312,000

Prior to the decision to stop the property division, ney income for the group was $1,570,000

This decision leads to decrease in operating income I consider it not acceptable.

Decision: keep property insurance division.

B.

Decision to drop all Property advertising costs of $400,000

And take group advertising spend up by $450,000

Expected to see a growth in sales of property by 10% and automobile by 8%.

Property insurance division Income statement

Sales $4,620,000

Variable costs 4,213,000

Contribution Margin 407,000

Direct fixed expense 0

Segment Margin 407,000

Common fixed expense 250,000

Operating income $157,000

Automobile insurance division Income statement

Sales $12,960,000

Variable costs 10,368,000

Contribution Margin 2,592,000

Direct fixed expense 500,000

Segment Margin 2,092,000

Common fixed expense 500,000

Operating income $1,592,000

Total business net income = $1,749,000

Which is an increase of $179,000 over the original Net income projections.

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borishaifa [10]

Answer:

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Explanation:

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4 0
2 years ago
Suppose a stock had an initial price of $117 per share, paid a dividend of $3.10 per share during the year, and had an ending sh
bonufazy [111]

Answer:

The correct answer for option (a) is 28.29% and for option (B) is 2.65%.

Explanation:

According to the scenario, the given data are as follows:

Initial price = $117

Ending price = $147

Dividend = $3.10

(a) We can calculate the Total return percentage by using following formula:

Total return percentage = ( Ending Price - Initial Price + Dividend) ÷ Initial Price

By putting the value, we get

Total return percentage = ( $147 - $117 + $3.10) ÷ ( $117)

= 28.29% (approx).

(b). we can calculate the dividend yield by using following formula:

Dividend Yield = Dividend ÷ Initial Price

By putting the value, we get

Dividend Yield = $3.10 ÷ $117

= 2.65%

8 0
3 years ago
Listing the pros and cons for each of your options is a part of which step in the decision-making process?.
fenix001 [56]

Answer:

Listing the consequences of each option.

Explanation:

8 0
2 years ago
Why would anyone select a bank that has unfavorable overdraft policies
OlgaM077 [116]

Answer:

The person may not have options due to age and distance and disabilities.

Explanation

6 0
2 years ago
you are billed $300 at 5% simple interest for 2 years but given an opportunity to pay only 3% compound interest for 2 years. Whi
balandron [24]
This question is a bit tricky to answer because it does not state how often interest rate is applied so lets say for the simple 5% interest rate the rate of interest was calculated after 2 years you would pay a total interest of $15 since interest was only calculated once but for the 3% calculating every year with compound it would be a total of 18.27 dollars in interest but then you would have to calculate the 5% simple interest the same way which would total to $30 if calculated once a year being more than the 3% compound. But lets say interest is calculated once a month your total for the 5% simple interest would be $360 dollars interest for those 2 years and the 3% compound would be $406.97 dollars in interest. So over all the less amount of times interest compounds the less interest there is making it more worth than the simple but if the compounding occurs more frequently the simple 5% interest is more worth it. In this situation I think it might just be yearly interest which makes the 3% compound more worth taking for this short amount of time.
6 0
2 years ago
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