It's About Time, Inc. manufacturers 2 lines of clocks: Digital and Analog. Under the current costing system, manufacturing overhead is applied to each line based on machine hours. Machine Setup costs account for the majority of manufacturing overhead and are expected to total $75,000 for the upcoming period. The controller for the company has suggested to management that an activity based costing system be analyzed and has determined that the number of machine setups drives the total machine setup costs. The following information was compiled for the analysis:
total expected machine hours for budgeted output-- digital=1,500 hours, analog=2,500 hours; budgeted output--digital=750 clocks, analog=500 clocks; number of clocks to be producted per machine setup-- digital=25 clocks, analog =10 clocks.
which of the following statements is correct with respect to machine setup costs?
A) Under the current costing system, 60% of the machine setup manufacturing overhead costs are applied to the digital product line.
B) under the activity based costing system, 37.5% of the machine setup manufacturing overhead costs are applied to the analog product line.
C) the current costing system is not over/undercosting the product lines with respect to machine setup costs.
D) If the digital product line is being overcosted with respect to machine setup costs, it is likely that the analog product line is also being overcosted with respect to machine setup costs.