The New Manager of the Insurance Division Does Not Understand

question 31

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:
a. Why might the company have different costing systems with different overhead rates for the standard and specialized policies?

Comprehend the impact of economies and diseconomies of scale on firm costs.

Understand the calculation and implications of fixed, variable, and total costs.

Analyze the financial viability and economic profitability of a business investment.

Understand the theories explaining global inequality and economic development, including modernization, dependency, and world-systems theory.

---

Definitions:

Factorial Research

A research design that involves two or more independent variables, also known as factors, and examines their interaction and main effects.

Single-Factor Research

An experimental design where the effect of a single independent variable on a dependent variable is assessed.

Independent Variable

A variable that is manipulated or categorized to observe its effect on a dependent variable in experimental research.

Interaction Effect

In statistics, a circumstance where the effect of one independent variable on a dependent variable is different at different levels of another independent variable.