USE AND OCCUPANCY INSURANCE

Step “A”
Income

Second, that part which is to be used as a basis for estimating
 the amount of Use and Occupancy insurance
necessary to properly protect the earnings of the next
fiscal year’s operations (Step C). In detail, the steps
are as follows:
Ar—The amount inserted here is the net income
from Sales (or Service) after discounts, returns and
allowances have been made.
A2—In many businesses, there are certain items of
income which are not derived from Sales, but nevertheless
 are from sources directly dependent on continued
business operations for their existence. Usually, these
are covered under a Use and Occupancy insurance
policy and should be added to income from Net Sales
lor Service) at this point. Do not include credit items
such as interest earned on bank balances, or interest
received on securities owned by the business or any
similar item of income not directly connected with or
produced through business operations, for its continuance.


A3—The amount inserted here represents the total
of Steps A1 and Az, or in essence, the “Income from
Operations.”

Step “B”’—
Deductions

That part of income which is disbursed for the
purchase of raw stock, materials and supplies entering
 into the finished product of a manufacturing plant
or for the purchase of stock and supplies to be sold by a
mercantile establishment (or for the supplies of a
“Service” organization) is not properly included in the
amount to be used as a basis for Use and Occupancy
insurance, and it must, therefore, be deducted. Then,
too, there are certain other miscellaneous costs which
should be deducted. Step B demonstrates, in a general
way the procedure to be followed in determining the
amount to be deducted from Operating Income of a
oast fiscal year to arrive at an actual basis for estimatng
 future Use and Occupancy insurance requirements.
Br—The amount entered here represents the inventory
 of all stock, materials and supplies on hand at
‘he beginning of the fiscal year.
B2—The amount entered here represents the net
:ost of purchases (including incoming freight) of stock
or raw stock) and materials and supplies, after discounts,
 returns, and allowances have been taken. This