Question

In: Operations Management

The auto insurance industry estimates that it costs three times the original purchase price (in parts...

The auto insurance industry estimates that it costs three times the original purchase price (in parts and labor) to reconstruct a wrecked automobile.   Why do you believe there is such a large discrepancy?

Solutions

Expert Solution

When initially producing an automobile, they produce in bulks and standard procedures are followed. They realise economies of scale when producing a new automobile. In case of wrecked automobile, each wrecked automobile is different. Each case has to be dealt differently. The procedures would also be costly.Also, when parts are purchased in less quantities, they cost more. Also, when an automobile out of market, it is difficult to obtain its parts. An automobile generally is wrecked after using for certain number of years. There is a high chance that the company is no longer manufacturing that particular model. In such cases, its parts are not easily available and obtaining them would be costlier.


Related Solutions

Q1. Spartan Auto Group is going to purchase an auto parts component from one of two...
Q1. Spartan Auto Group is going to purchase an auto parts component from one of two competing suppliers and it is going to base its decision, in part, on the supply chain performance of the two suppliers. The company has obtained the following data for average raw materials, work-in-process, and finished goods inventory value, as well as cost of goods sold for the suppliers. Assume each supplier operates 50 weeks per year. Supplier 1 Supplier 2 Cost of goods sold...
The president of the American Insurance Institute wants tocompare the yearly costs of auto insurance...
The president of the American Insurance Institute wants to compare the yearly costs of auto insurance offered by two leading companies. He selects a sample of 15 families, some with only a single insured driver, others with several teenage drivers, and pays each family a stipend to contact the two companies and ask for a price quote. To make the data comparable, certain features, such as the deductible amount and limits of liability, are standardized. At the .10 significance level,...
The president of the American Insurance Institute wants to compare the yearly costs of auto insurance...
The president of the American Insurance Institute wants to compare the yearly costs of auto insurance offered by two leading companies. He selects a sample of 15 families, some with only a single insured driver, others with several teenage drivers, and pays each family a stipend to contact the two companies and ask for a price quote. To make the data comparable, certain features, such as the deductible amount and limits of liability, are standardized. The data for the sample...
An insurance agent plans to sell three types of policies— homeowner’s insurance, auto insurance and life...
An insurance agent plans to sell three types of policies— homeowner’s insurance, auto insurance and life insurance. The average amount of profit returned per year by each type of insurance policy is as follows: Policy                            Yearly Profit/Policy Homeowner’s               $50 Auto 40 Life 75 Each homeowner’s policy will cost $18.20, each auto policy will cost $14.50 and each life insurance policy will cost $30.50 to sell and maintain. He has projected a budget of $80,000 per year. In addition, the...
An insurance agent plans to sell three types of policies— homeowner’s insurance, auto insurance and life...
An insurance agent plans to sell three types of policies— homeowner’s insurance, auto insurance and life insurance. The average amount of profit returned per year by each type of insurance policy is as follows: Policy/Yearly Profit/Policy Homeowner’s $50 Auto 40 Life 75 Each homeowner’s policy will cost $18.20, each auto policy will cost $14.50 and each life insurance policy will cost $30.50 to sell and maintain. He has projected a budget of $80,000 per year. In addition, the sale of...
If the original price of medical care (with no insurance) equal $1,000, the quantity demanded =...
If the original price of medical care (with no insurance) equal $1,000, the quantity demanded = 10. If insurance (Policy X) is provided, out of pocket drops to $400. Also the quantity of medical care that will be demanded rises to 40. What is the value of social loss due to insurance? $18,000 $36,000 $600 $60 none of the above
If liability insurance is not mandatory for auto driver, will you still purchase it? Based upon...
If liability insurance is not mandatory for auto driver, will you still purchase it? Based upon your answer, please define your attitude (averse, neutral, love) toward risk.
If liability insurance is not mandatory for auto driver, will you still purchase it? Based upon...
If liability insurance is not mandatory for auto driver, will you still purchase it? Based upon your answer, please define your attitude (averse, neutral, love) toward risk.    
Q1. ABCD is going to purchase an auto parts component from one of two competing suppliers...
Q1. ABCD is going to purchase an auto parts component from one of two competing suppliers and it is going to base its decision, in part, on the supply chain performance of the two suppliers. The company has obtained the following data for average raw materials, work-in-process, and finished goods inventory value, as well as cost of goods sold for the suppliers. Assume each supplier operates 50 weeks per year. Supplier 1 Supplier 2 Cost of goods sold $8,500,000 $14,800,000...
Tia is married and is employed by Carrera Auto Parts. In 2019, established high-deductible health insurance...
Tia is married and is employed by Carrera Auto Parts. In 2019, established high-deductible health insurance for all its employees. The plan has a $2,700 deductible for married taxpayers. Carrera also contributes 5% of each employee’s salary to a Health Savings Account. Tia’s salary is $43,000 in 2019 and $45,000 in 2020. Tia makes the maximum allowable contribution to her HSA in 2019 and 2020. She received $600 from the HSA for her 2019 medical expenses. In 2020, she spends...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT