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. Estimate the amount of Customer Service support costs allocated to the product called Annuities-New Policies-Midwest under the old system. Also, estimate the amount of Customer Service support costs allocated to same product under the new system. Comment on what is driving the difference.

Aggregated Corporate Support Costs for this Year Policy acquisition $ 4,375,000 Customer service 2,426,000 Sales and marketing 4,552,000 Other corporate support 2.567.000 Total $ 13,920,000 Annuities New In-Force Life Insurance New In-Force Support Costs New Basis 5 0.6 Policy acquisition Customer service Sales and marketing Corporate overhead Steps Calls Contacts AUM 2 0.5 10 $50,0 00 0 0.2 0 $50,000 0 0.4 0 $65,000 20 $1,500 GIBSON INSURANCE COMPANY Summary of Product Line and Business-Unit Support Cost Allocations Using the Number of Policies as the Allocation Basis ($13,920,000 = 169,240 policies = $82.25/policy) Midwest Gibson Compton Total Annuities: New policies In-force policies Subtotal $ 822,500 3.701.250 $4,523,750 $ 709,406 2.977,450 $3,686,856 $ 99,934 $1,631,840 386,575 7,065,275 $486,509 $8,697,115 Life Insurance: New policies In-force policies Subtotal $102,813 460,600 $563,413 $ 283,763 1,110,375 $1,394,138 $ 666,225 2.599,100 $3.265,325 $1,052,801 4,170,075 $5,222,876 Rounding Total support costs 3 $5.087.166 $5.080.997 $3.751.837 $13.920,000 Aggregated Corporate Support Costs for this Year Policy acquisition $ 4,375,000 Customer service 2,426,000 Sales and marketing 4,552,000 Other corporate support 2.567.000 Total $ 13,920,000 Annuities New In-Force Life Insurance New In-Force Support Costs New Basis 5 0.6 Policy acquisition Customer service Sales and marketing Corporate overhead Steps Calls Contacts AUM 2 0.5 10 $50,0 00 0 0.2 0 $50,000 0 0.4 0 $65,000 20 $1,500 GIBSON INSURANCE COMPANY Summary of Product Line and Business-Unit Support Cost Allocations Using the Number of Policies as the Allocation Basis ($13,920,000 = 169,240 policies = $82.25/policy) Midwest Gibson Compton Total Annuities: New policies In-force policies Subtotal $ 822,500 3.701.250 $4,523,750 $ 709,406 2.977,450 $3,686,856 $ 99,934 $1,631,840 386,575 7,065,275 $486,509 $8,697,115 Life Insurance: New policies In-force policies Subtotal $102,813 460,600 $563,413 $ 283,763 1,110,375 $1,394,138 $ 666,225 2.599,100 $3.265,325 $1,052,801 4,170,075 $5,222,876 Rounding Total support costs 3 $5.087.166 $5.080.997 $3.751.837 $13.920,000

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