In comparing the results of ABC with the volume-based cost system (based on direct labor hours), which of the following statements is most likely to be true?

a. The current cost system will overcost the deluxe model compared to ABC.

b. The current cost system will undercost the economy model compared to ABC.

c. The current cost system will overcost the economy model compared to ABC.

d. Both a and b are true.

Hi-Def Video Company makes two types of digital DVD players, economy and deluxe, with the following per unit cost information:

The company currently applies \($1\) million in manufacturing overhead to the two products on the basis of direct labor hours. Both products require two hours of direct labor.

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Direct materials Direct labor Manufacturing overhead Full manufacturing cost per unit Economy (8,000 units) (2,000 units) Deluxe $50 $100 25 25 ? ? ? ?