?It's About? Time, Inc. manufacturers 2 lines of? clocks: Digital and Analog. Under the current costing? system, manufacturing overhead is applied to each line based on machine hours. Machine Setup costs account for the majority of manufacturing overhead and are expected to total? $75,000 for the upcoming period. The controller for the company has suggested to management that an activity based costing system be analyzed and has determined that the number of machine setups drives the total machine setup costs. The following information was compiled for the? analysis:

	Digital	Analog
Total Expected Machine Hours for Budgeted Output	?1,500 hours	?2,500 hours
Budgeted Output	500 clocks	500 clocks
Number of Clocks to be Produced per Machine Setup	25 clocks	5 clocks

Which of the following statements is correct with respect to machine setup? costs?

A.Under the current costing? system, 62.5% of the machine setup manufacturing overhead costs are applied to the Digital product line.

B.Since direct material and direct labor information are not? given, it is impossible to determine if the product lines are being? over/undercosted.

C.If the Digital product line is being overcosted with respect to machine setup? costs, it is likely that the Analog product line is also being overcosted with respect to machine setup costs.

D.The current costing system is not? over/undercosting the product lines with respect to machine setup costs.

E.Under the activity based costing? system, 83.3% of the machine setup manufacuring overhead costs are applied to the Analog product line.

It's About Time, Inc. manufacturers 2 lines of clocks: Digital and Analog. Under the current costing system, manufacturing overhead is applied to each line based on machine hours. Machine Setup costs account for the majority of manufacturing overhead and are expected to total $75,000 for the upcoming period. The controller for the company has suggested to management that an activity based costing system be analyzed and has determined that the number of machine setups drives the total machine setup costs. The following information was compiled for the analysis Total Expected Machine Hours for Budgeted Output Budgeted Output Number of Clocks to be Produced per Machine Setup Digital 1,500 hours 500 clocks 25 clocks Analog 2,500 hours 500 clocks 5 clocks Which of the following statements is correct with respect to machine setup costs? 0 A. Under the current costing system, 62.5% of the machine setup manufacturing overhead costs are applied to the Digital product line 0 B. Since direct material and direct labor information are not given, it is impossible to determine if the product lines are being over/undercosted C. If the Digital product line is being overc osted with respect to machine setup costs, it is likely that the Analog product line is also being overc osted with respect to machine setup costs ( D. The current costing system is not over/undercosting the product lines with respect to machine setup costs 0 E. Under the activity based costing system. 83.3% of the machine setup manufacuring overhead costs are applied to the Analog product line