It's About? Time, Inc. manufacturers 2 lines of? clocks: Digitaland Analog. Under the current costing? system, manufacturingoverhead is applied to each line based on machine hours. MachineSetup costs account for the majority of manufacturing overhead andare expected to total? $75,000 for the upcoming period. Thecontroller for the company has suggested to management that anactivity based costing system be analyzed and has determined thatthe 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	750 clocks	500 clocks
Number of Clocks to be Produced per Machine Setup	25 clock	10 clocks

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

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

B. Under the activity based costing? system, 37.5% of themachine setup manufacuring overhead costs are applied to the Analogproduct line.

C. Under the current costing? system, 60% of the machine setupmanufacturing overhead costs are applied to the Digital productline.

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

E. If theDigital product line is being overcosted with respect to machinesetup?costs,it is likely thatthe Analog product line is also being overcosted with respect tomachine setup costs.