The New Manager of the Insurance Division Does Not Understand

question 88

Essay

The new manager of the insurance division does not understand how the company can have so many overhead rates for assigning costs to the activities of the company's life insurance underwriters.There is one rate schedule for average assignable costs when agents write standard policies.There is another rate schedule which the agents must complete when they write special policies, and these policies are costed out differently from those that are categorized as standard policies.Required:
Why might the company have different costing systems with different overhead rates for the standard and specialized policies?

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Definitions:

Market Order

A type of trading order that instructs to buy or sell a security immediately at the current market price.

Discretionary Order

An order given to a broker allowing them discretion on the execution timing and price of a trade, within certain pre-established parameters.

Limit Order

An order to buy or sell a security at a specific price or better.

Maximum Possible Loss

The worst-case scenario loss that an investment or portfolio could suffer during a specified period.