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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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