Owl's Hours produces herbal tea and prides itself in having one of the largest ranges of herbal teas in Australia. It sells more than 50 varieties of tea leaves with a wide range of prices (depending on where the tea leaves are grown). The production processes of its products is simple, but vary depending on whether the tea is sold as loose leaves (which requires packing tea leaves in various sized boxes) or tea bags (which requires additional process in packaging tea in specially designed tea bags). Owl's Hours decides to use an operation costing system. This decision is

correct, because the company uses a large variety of tea leaves as direct materials and yet has simple production processes.

correct, because the company uses a large variety of tea leaves as direct materials and the different products require different sequences of processes.

incorrect, because the different production lines require the tea leaves to be packaged in very distinctive methods.

incorrect, because the company has a very homogenous product - it produces and sells only tea.