Problem: The percentages of product costs comprised by direct materials, direct labor, and manufacturing overhead for three companies are as follows:
Company A B C
Direct Materials 7% 21% 42%
Direct labor 13 42 49
manufacturing overhead 80 37 9
100% 100% 100%
Based on this information, which of these three companies would probably improve its product costing accuracy most by converting to activity-based costing (ABC)? Explain your answer.