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Dreamy Company uses direct labor hours to allocate overhead to all of its jobs. It allocates overhead costs of $17,400 to two different jobs as
Dreamy Company uses direct labor hours to allocate overhead to all of its jobs. It allocates overhead costs of $17,400 to two different jobs as follows: Job 1: (12 hours) = $8,700; Job 2: (12 hours) = $8,700 The production process for Job 2 was then automated. Now Job 2 requires only 3 hours of direct labor but 4 hours of mechanical processing. As a result, total overhead increases to $22,200. Select the incorrect statement from the following. Multiple Choice The increased overhead costs associated with automation should be allocated to both jobs. O The use of machine hours as the allocation base would significantly improve the overhead cost allocations. While the actual processing of Job 1 was not affected by automation, it received an increase of $9,060 in its overhead allocation. Automation and the costing system used by the company cause the cost of Job 1 to be significantly overstated
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