Pattap Company produces Daniels and Jonathans and operates at capacity. Pattap currently uses a single-plant wide rate based on direct labor hours to allocate its $600,000 manufacturing overhead to the two product lines. Cathy Pattap, the President of Pattap Company, has heard about activity-based costing (ABC), and has hired you as a consultant to tell her if switching to an ABC system would yield a more accurate cost of her two product lines. After doing an activity analysis, you find that manufacturing overhead can be divided into three activity cost pools (with corresponding cost drivers) machinery, setup, and inspection. The overhead consumption ratio of each activity per product line, as well as additional informational, follows:

Daniel Jonathan Total

Annual production in units 80,000 20,000 100,000

Direct labor hours 6,500 3,500 10,000

Activities and Activity Cost Drivers

Machinery (machine hours) 80% 20% 100%

Setup (production runs) 80% 20% 100%

Inspection (inspection hours) 80% 20% 100%

Based on the above activity analysis, what error if any, is being caused by using a single plant-wide rate (the current method) in costing Daniel and Jonathan?