Dreamz R Us is a manufacturer of mattresses. The company produces and sells two products: spring mattresses and water beds. Currently the company uses a traditional costing system to allocate manufacturing overhead to production based on machine hours. Management is considering switching to ABC to improve costing accuracy. In their analysis of manufacturing overhead, management has identified two activities and cost pools: Machining and Machine Setup. $105,000 of the budgeted manufacturing overhead relates to the machine setup activity. Machine setup overhead costs are driven by number of setups. The projected production levels for the upcoming period are 1,000 spring mattresses and 8,000 water beds. The following information was compiled for the product lines: Machine Hours Setups Spring Mattresses 1.0 hours per mattress 5 mattresses per setup Which of the following statements is correct with regard to the above information? Water Beds 0.5 hours per mattress 5 mattresses per setup A. Under Activity-Based Costing, 50% of the machine setup manufacturing overhead costs is allocated to the Spring Mattress product line. OB. The current costing system is overcosting both the Spring Mattress line and the Water Bed line with respect to machine setup manufacturing overhead costs. OC. Under the current costing system, 20% of the machine setup manufacturing overhead costs are allocated to the Spring Mattress product line. OD. The cost distortion per unit for both the Spring Mattress and Water Bed product lines with respect to the machine setup manufacturing overhead costs is equal.