Posted: September 10th, 2021

Assignment: I need help writing a research paper., Q1. Magma Services processes disability and life insurance claims for insurance companies

Q1. Magma Services processes disability and life insurance claims for insurance companies.
Magma is paid $75 for each Disability claim processed and $85 for each Life Insurance claim processed.
There are 2 activities (with short-term fixed capacities and costs): Recording and then Evaluation.
Weekly capacity is 120 man hours in Recording and 78 man hours in Evaluation.
Weekly costs are $2,400 for Recording and $4,680 for Evaluation.
Additionally, there are direct costs of $5 per disability claim and $10 per life insurance claim.
Organization sustaining costs (long-term fixed) are $2,000.
Last week Magma processed 150 Disability & 150 Life Insurance claims. A time utilization study revealed the following resource utilization.
Activity Disability claims Life Insurance Claims
Recording 75 man hours 45 man hours
Evaluation 37.5 man hours 36 man hours
Required: 1. What are the per unit activity costs ($ per man hour) for:
Recording: 2,400/120 = $20 per man hour; Evaluation: 4,680/78 = $60 per man hour.
2. Prepare activity-based profitability statements for each claim type and the total firm for the past week.
Line Item Disability Life Insurance Total
# of claims 150 150 300

3. What do these statements tell you (if anything at all) about the impact of dropping Private Insurer claims
(a) In the short run Nothing, ABC addresses long run product profitability.
(b) Alternatively, in the long run (state any implicit assumptions)

Q2. Continuing with Q1 (All the parts below pertain to the short-term).
1. What is the contribution margin per claim for each type of claim?
Disability claims: (755) = $70 Life Insurance claims: (5010) = $40
2. Suppose the demand for Life Insurance claims is unlimited, but the demand for Disability claims is limited to 210 claims, how much of each type of claim should Magma choose to service in the short-term (whence capacities and costs are fixed as given earlier)?
2.a.To answer the above, first write down the objective function and constraints of the planning problem. Use the following notation: D for # of disability constraints; 1000 words paper L for # of Life Insurance claims.
Objective function: Maximize [ 70  D + 40  L ]
Subject to Constraint set:
Recording: 0.5  D + 0.3  L ≤ 120
Evaluation: 0.25  D + 0.24  L ≤ 78
D ≥ 0; L ≥ 0
D and L integer

2.b.Then sketch the constraints below and shade in the feasible region of production. (Label all points on the axes.)
# of disability claims D

# of Life Insurance claims L

2.c. Then give your answer (how much of each type of claim should the firm choose to service in the short-term), while explaining any further computations you do to reach this conclusion.

Fill in: D (# of Disability claims): ____________ L # of Life Insurance claims: ____________

Explain: Three corners (D,L) to evaluate:
(D = 240, L = 0) : Total Cont. Margin = 240  70 = $16,800 (maximum)

2.d. What is the total profit the firm would report with the “production plan” identified in 2.c. above?
(D = 120, L = 200) : Total Cont. Margin = 120  70 + 200  40 = $16,400

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