Assume the Actuary Estimates the Net Cost of Providing Health

question 59

Multiple Choice

Assume the actuary estimates the net cost of providing health care benefits to a particular employee during his retirement years to have a present value of $60,000. If the benefits relate to an estimated 25 years of service and five of those years have been completed,

• A)The EPBO would be $12,000.
• B)The EPBO would be $8,400.
• C)The APBO would be $8,400.
• D)The APBO would be $12,000.$60,000 5/25 = $12,000 APBO

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Definitions:

Fixed Costs

Costs that do not change with the level of output or activity, including salaries, rent, and insurance.

Activity Level

A measure of the amount of work or production a business undertakes, which can affect costs and efficiencies.

Total Cost Line

A graphical representation of how total costs change with changes in the level of activity or production volume.

Per Unit Cost

The cost associated with a single unit of product or service, calculated by dividing total costs by the number of units produced.