What is the expected cost to the company

Reference no: EM13187437

Fred's Fasteners is a manufacturing company that has decided they are large enough to choose to be self-insuring for employee health insurance. The Chief Financial Officer has asked for some projections on the costs to the company for the next fiscal (also a calendar) year. Analysts studying records for prior periods have decided on the following assumptions.

January employment level will be 9,250, and is expected to increase in subsequent months by a percentage randomly chosen from a uniform distribution, minimum of -2%, maximum of 4%

Each emplyee will contribute $325 per month. This is fixed for the year.

Payable health care benefits (costs) for the program will be about $625 for January but will rise by a randomly determined percentage that is normally distributed with a mean value of 0.4% and standard deviation of 0.15% each month from the prior month.

There is also a processing cost of $75 per month per employee paid to Blue Cross who will be handling the claims processing.

1. What is the Expected cost to the company for next year?

2. The CFO wants to set a budget amount that we have a confidence level of 85% that we won't go over budget. What figure should be used?

3. What is the highest company cost found in the simulations?

Reference no: EM13187437

Questions Cloud

What is the expected profit for one month : Investigate the profitability that would result if instead of baking 30 batches each morning, they bake 25, 30, 35, or 40 batches. Which would you recommend and why?

How many units will actually be rented each month : Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2500 per month. If the government can enforce that price floor, will there be a surplus or a shortage Of how many u..

State all assumptions and find 90% confidence interval : A car rental company is interested in the amount of time its vehicles are out of operation for repair work.

Sedimentary rocks and soil term : Choose the proper listing of detritus terms, going from smallest to largest of the words offered. Sedimentary rocks can form

What is the expected cost to the company : What is the Expected cost to the company for next year and the CFO wants to set a budget amount that we have a confidence level of 85% that we won't go over budget. What figure should be used?

Determine the maximum price for rental housing : Suppose that college students in your tow persuaded the town council to enact a law settings the maximum price for rental housing at $400 per month. Will this help or hurt college students who rent housing In your answer, address how this price ce..

Find the equation for the plane tangent to the paraboloid : Find the equation for the plane tangent to the paraboloid z = 2x2 + 3y2 that is also parallel to the plane 4x - 3y - z = 10

What is the probability that his balance will be negative : What is his expected cash balance at the end of the following May and what is the probability that his balance will be negative in one or more month?

What is the expected monetary value : Construct a Decision Tree for this problem and answer the following questions - Should you accept the wager and what is the Expected Monetary Value?

User Account

All Pages