Final answer:
Lunker Lures would benefit from an activity-based costing system that allocates overhead costs based on the specific activities associated with each lure model, ensuring more accurate product costing.
Step-by-step explanation:
The best system for Lunker Lures, which makes ten different models of fishing lures with varying levels of detail and complexity, would likely be activity-based costing (ABC). This overhead costing system allocates factory overhead to products in a more logical manner by taking into account the specific activities that contribute to the overhead costs. By using ABC, the company ensures that complex models that use more resources are allocated a fair share of the overhead, while simpler models are not overburdened with costs.
In a traditional costing system, all products might be allocated the same overhead rate, regardless of the complexity or the resources used. However, the ABC system identifies individual activities involved in the production of each model, such as design time, the number of parts, or the intricacy of the components, and then assigns costs based on these activities. This leads to more accurate product costing and can aid in pricing decisions, cost control, and profitability analysis.