USE AND OCCUPANCY INSURANCE 
Step “A” 
Income 
Second, that part which is to be used as a basis for esti- 
mating 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 neverthe- 
less 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 con- 
tinuance. 
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 enter- 
ing 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 estimat- 
ng future Use and Occupancy insurance requirements. 
Br—The amount entered here represents the in- 
ventory 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 dis- 
counts, returns, and allowances have been taken. This