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Activity-based costing (ABC)?

The percentages of product costs comprised by direct materials, direct labor, and manufacturing overhead for three companies are as follows:
Company A B C
Direct Materials 7% 21% 42%
Direct labor 13 42 49
manufacturing overhead 80 37 9
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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The percentages of product costs comprised by direct materials, direct labor, and manufacturing overhead
The percentages of product costs comprised by direct materials, direct labor, and manufacturing overhead for three companies are as follows:
Company A B C
Direct Materials 7% 21% 42%
Direct labor 13 42 ...

Solution Summary

The solution discusses which of the three companies would probably improve its product costing accuracy most by converting to activity-based costing (ABC).

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