Cost Accounting Quiz
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PRICING AND PROFITABILITY
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A company is comparing its traditional costing system, which allocates overhead at 20% of sales, with a new activity-based costing system. Under the ABC system, the only overhead activity is 'Client Services' with a cost driver rate of $200 per service hour. Client Alpha generated $500,000 in sales and required 300 service hours. The cost of goods sold for Client Alpha was $350,000. What is the difference in the calculated operating profit for Client Alpha between the traditional system and the ABC system?
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