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

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