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Libre Logistics Ltd. insures against accidents of its motor fleet. The fleet consists of highly...

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Accounting

Libre Logistics Ltd. insures against accidents of its motor fleet. The fleet consists of highly specialised, imported refrigerator trucks. Contributing factors to the high value of incidents are the poor conditions of the municipal and provincial roads and the quality of drivers. The following are the records of Libre Logistics Ltd: Table 1: Loss experience of the motor fleet over the last five years Year No. of vehicles Average loss per event No of accidents Total cost for the year 1 20 R1,500,000 10 R15,000,000 2 20 R2,200,000 12 R26,400,000 3 25 R1,750,000 15 R26,250,000 4 30 R2,000,000 20 R40,000,000 5 50 R3,500,000 25 R87,500,000 Table 2: Quotations under consideration for the insurance of the motor fleet Quote number Quoted annual premium Annual limit for damage to motor fleet Deductible 1 R15,000,000.00 R60,000,000 R0 2 R10,000,000.00 R30,000,000 R25,000 3 R8,500,000.00 R25,000,000 R50,000 4 R6,000,000.00 R20,000,000 R70,000 5 R5,000,000.00 R10,000,000 R100,000 Question Calculate the TEC value for quote number 2 a. R10,014,137.93 b. R6,039,586.21 c. R8,528,275.86 d. R15,000,000.00

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