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    Importance of Manufacturing Overhead Allocation

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    The percentages of product costs comprised by direct materials, direct labor, and manufacturing overhead for three companies are as follows:

    Company A Company B Company C
    Direct materials 7% 21% 42%
    Direct labor 13 42 49
    Manufacturing 80 37 9
    overhead
    100% 100% 100%

    Based on this information, which of these three companies would probably improve its product costing accuracy most by converting to activity-based costing (ABC)? Explain your answer.

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    https://brainmass.com/business/business-math/importance-manufacturing-overhead-allocation-122730

    Solution Preview

    Direct labor and direct materials are easily traced to products. Use of ABC to trace costs to activities and then to ...

    Solution Summary

    Solution explains which of the given three companies can probably improve its product costing accuracy most by converting to activity-based costing (ABC).

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