Mail Co produces two kinds of envelopes called the Basic and the Deluxe. The Deluxe uses more expensive materials than the Basic. Mail Co currently uses traditional absorption costing to allocate overheads to its products using production units as the basis for apportionment. Information for the two products is as follows: Selling price is calculated using a percentage mark-up on cost. Mail Co is now considering the introduction of an activity-hhised costing (ABC) system. Budgeted annual overheads are as follows: The trainee accountant has been asked to evaluate the impact on Mail Co if it changes to an activitybased costing (ABC) system. Which of the following statements made by the trainee accountant is/are true? (1) Higher production costs overall would be incurred if ABC were introduced (2) Using ABC will avoid over or under absorption of overheads 2 only Both 1 and 2 1 only Neither 1 nor 2