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    Question

    Traditional costing over-allocates overhead to mass

    motor policies and under-allocates to niche marine policies. Which ABC driver is most appropriate?
    A Number of employees Correct Answer Incorrect Answer
    B Gross premium written Correct Answer Incorrect Answer
    C Number of claims handled and policy endorsements Correct Answer Incorrect Answer
    D Square footage of offices Correct Answer Incorrect Answer
    E Machine hours Correct Answer Incorrect Answer

    Solution

    Activity drivers tied to claims/endorsements capture effort better than volume measures.

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