atharvakhot31

Consider a collective risk model, where the claim count is distributed Poi(7) and the claim severity is distributed exponentially with mean equals to 1. Now, you are the junior analyst of the company and is assigned to provide a comparison between a proportional reinsurance of 50% and an excess of loss reinsurance with M =1/2. You should provide both the expectation and the variance of the pay-out.

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $900,000 $260,000 $400,000 $240,000
Variable expenses . . . . . . . . . . . . . . . . . . . . 490,000 120,000 210,000 160,000
Contribution margin . . . . . . . . . . . . . . . . . . . 410,000 140,000 190,000 80,000
Fixed expenses:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 68,000 8,000 40,000 20,000
Liability insurance . . . . . . . . . . . . . . . . . . . 42,000 20,000 7,000 15,000
Program administrators’ salaries . . . . . . . 115,000 40,000 38,000 37,000
General administrative overhead* . . . . . . 180,000 52,000 80,000 48,000
Total fi xed expenses . . . . . . . . . . . . . . . . . . 405,000 120,000 165,000 120,000
Net operating income (loss) . . . . . . . . . . . . . $ 5,000 $ 20,000 $ 25,000 $ (40,000)
*Allocated on the basis of program revenues.
The head administrator of Jackson County Senior Services, Judith Miyama, is concerned
about the organization’s finances and considers the net operating income of $5,000 last year to be

razor-thin. (Last year’s results were very similar to the results for previous years and are represen-
tative of what would be expected in the future.) She feels that the organization should be building

its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After
seeing the above report, Ms. Miyama asked for more information about the financial advisability
of perhaps discontinuing the housekeeping program.
The depreciation in housekeeping is for a small van that is used to carry the housekeepers
and their equipment from job to job. If the program were discontinued, the van would be donated
to a charitable organization. None of the general administrative overhead would be avoided if the
housekeeping program were dropped, but the liability insurance and the salary of the program
administrator would be avoided.
Required:
1. Should the Housekeeping program be discontinued? Explain. Show computations to support
your answer.
2. Recast the above data in a format that would be more useful to management in assessing the
long-run financial viability of the various services.

a. Calculate:
i. Great Moments (Pty) Ltd’s cash operating cycle at the beginning of January 2021.
Round off days to nearest day. (6 marks)
ii. Forecast overdraft required at the end of January 2021. (18 marks)
iii. Great Moments (Pty) Ltd’s current ratios at the beginning and end of January 2021. (6
marks)
b. Appraise and recommend five ways or strategies to manage trade receivables you would
provide to the Great Moments (Pty) Ltd’s finance manager. (10 marks)

a.A sinewave has a period (duration of one cycle) of 645 μs. What is the corresponding frequency of this sinewave, in kHz, expressed to 3 significant figures? (See Study Note 7.1 in the ‘Using Numbers (maths)’ booklet.)

A (i) If the frequency of the sinewave is now reduced by a factor of 3.5, what will be the new period value? Express your answer in ms, to 3 significant figures.

Note: In the second part of this question, to avoid rounding errors in your calculations, use the full frequency value from the first part, not the rounded value to 3 significant figures.