In the Exposure Based Projection Method for determining fixed expenses and variable expenses:
If fixed expenses are not increasing as much as exposures from year to year, then this could be an indication of economics of scale. The text says that an adjustment might then be required. WHY!? I don't understand why this is a problem.
Say you've got economies of scale happening as a result of more exposures being written. You've got the following fixed general expense and the exposures amts by year:
CY 07: (50/1000) = .050
CY 08: (60/1300) = .046
CY 09: (70/1600) = .044
Selected project avg fixed expense per exposure = .044 (the latest year)
Is this wrong? Why? What up yaalllllllllllll
If fixed expenses are not increasing as much as exposures from year to year, then this could be an indication of economics of scale. The text says that an adjustment might then be required. WHY!? I don't understand why this is a problem.
Say you've got economies of scale happening as a result of more exposures being written. You've got the following fixed general expense and the exposures amts by year:
CY 07: (50/1000) = .050
CY 08: (60/1300) = .046
CY 09: (70/1600) = .044
Selected project avg fixed expense per exposure = .044 (the latest year)
Is this wrong? Why? What up yaalllllllllllll
Economies of Scale - Fixed Expenses
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