Three cost drivers are used to estimate the cost of processing insurance claims.The cost drivers are: (1)claim amount,(2)age of vehicle in accident and (3)age of driver in accident.The percentages attributable to the cost drivers are 50% for claim amount,and 15% for each of the other two cost drivers.What is the cost to process Claim #101? The claim amount is $1,000.The age of the vehicle is 5 years.The age of the driver is 20 years.
A) $3.00
B) $3.75
C) $500
D) $503.75

Question

Quizplus · Accepted Answer

The cost driver percentages are: 
- Claim amount = 50% 
- Age of vehicle in accident = 15% 
- Age of driver in accident = 15%

To calculate the cost to process Claim #101, first, you need to calculate the total cost driver percentage: 
- Claim amount = 50% of $1,000 = $500 
- Age of vehicle in accident = 15% of 5 years = 0.75 
- Age of driver in accident = 15% of 20 years = 3

Total cost driver percentage = $500 + $0.75 + $3 = $503.75

Therefore, the cost to process Claim #101 is $503.75.

Three Cost Drivers Are Used to Estimate the Cost of Processing