The Big Coverup, Inc. manufactures Jeep tire covers in small batches. The company has two main product lines: patterned and solid. The company currently uses a traditional costing system and allocates manufacturing overhead to production based on machine hours logged. Due to pricing concerns, management is considering moving to an activity based costing system and has identified two major activities which generate 80% of the total manufacturing overhead. The activities, estimated cost pools, cost drivers, and estimated activity levels based on the projected production levels are 25 identical patterned covers and 120 identical solid covers for the upcoming period are listed below: activity machine setup inspection estimated cost pool $2,500 $1,000 cost driver setups inspection hours activity level for patterned covers 5 setups 50 hours activity level for solid covers 3 setups 30 hours The remaining 20% of estimated manufacturing overhead is considered general factory overhead and will be continue to be allocated to production under the new system using machine hours. Each patterned cover is expected to use $12.75 of direct material costs, $8.00 of direct labor costs, and 0.62 machine hours. Each solid cover is expected to use $3.25 of direct material costs, $12.00 of direct labor costs, and 0.60 machine hours. Direct laborers are expected to be paid at a rate of $20 per direct labor hour. Which of the following statements is correct? A. The cosumption ratios differ between the current costing system and the activity based costing system for the estimated manufacturing overhead considered general factory overhead. B. The estimated inspection overhead accounts for approximately 57% of the total estimated overhead. C. Under activity based costing, 37.5% of the overhead related to inspection is allocated to the solid covers. D. The traditional costing system allocates approximately 12% of the total estimated manufacturing overhead to the patterned covers. E. The current costing system is overcosting the patterned covers and undercosting the solid covers with respect to the estimated machine setup overhead. Time Remaining: 00:52:46 Next