Activity-Based Costing Can "Unlock" Savings, Not Apparent When Traditional Costing

question 64

True/False

Activity-based costing can "unlock" savings, not apparent when traditional costing is used, because the system requires a closer examination of operations.

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Definitions:

Variable Overhead

Costs of production that fluctuate with the level of output, such as utilities or raw materials.

Direct Labor-hours

Represents the total hours worked directly on the production of goods, important for calculating the labor cost per unit.

Labor Rate Variance

The difference between the actual cost of labor and the standard or expected cost, often analyzed in cost accounting.

Labor Efficiency Variance

Labor Efficiency Variance measures the difference between the actual hours worked and the standard hours expected for the work performed.