Riskless Insurance Uses Budgets to Forecast and Monitor Overhead Throughout

question 42

Essay

Riskless Insurance uses budgets to forecast and monitor overhead throughout the organization. The following budget formula relates to the processing of applications for automobile policies in any given month:
Total overhead = $6.80APH + $13,500
where APH = application processing hours
The typical automobile insurance policy has an estimated processing time of 1.5 hours.
During June, management originally anticipated that 320 applications would be processed. Activity was lower than expected, with only 280 applications completed by month-end, and the following costs were incurred: variable overhead, $2,950; fixed overhead, $13,700.
Required:
A. What volume level of applications and processing hours would have been used if Sitka had constructed a static budget?
B. Construct a flexible budget that shows the expected monthly variable and fixed overhead costs of processing 270, 300, and 330 applications.
C. From a cost perspective, did the company perform better or worse than anticipated in June? Show calculations to support your answer.

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Definitions:

Social Engineering

Getting around security systems by tricking computer users inside a company into revealing sensitive information or gaining unauthorized access privileges.

Confidential

Information or material designated as private or secret, requiring careful handling and restricted access to protect privacy or integrity.

Credit Bureaus

Institutions that collect and compile individual credit histories, providing credit reports to lenders for decision-making purposes.

Appealing Fix

A solution or repair to a problem that is attractive or satisfying because it is effective, easy, or beneficial.