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LO 6.1What is the predetermined overhead rate, and when is it typically estimated?


LO 6.1LO 6.3When is an activity-based costing system better than a traditional allocation system?


LO 6.2What is the advantage of labeling activities as value added or nonvalue added?


LO 6.2What conditions are necessary to designate an activity as a cost driver?


LO 6.2For each cost pool, identify an appropriate cost driver.

  1. order department
  2. accounts receivable processing
  3. catering
  4. raw material inventory

LO 6.3How is the primary focus of activity-based costing different from that of traditional allocation?


LO 6.3What are the primary differences between traditional and activity-based costing?


LO 6.3How are service companies similar or different from manufacturing companies in using ABC costing?


LO 6.3How are costs allocated in an ABC system?


LO 6.4In production, what has changed to allow ABC costing to become valuable?


LO 6.4Why is it important to know the true cost for a product or service?


LO 6.5What is the primary difference between variable costing and absorption costing?


LO 6.5Why would managers prefer variable costing over absorption costing?


LO 6.5Why is absorption costing the method allowable for GAAP?


LO 6.5Can a company gather information for both variable and absorption costing systems?

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