Hazel Company allocates overhead based on direct labor hours. It allocates overhead costs of $15,600 to two different jobs as follows: Job 1: (12 hours) = $7,800; Job 2: (12 hours) = $7,800 The production process for Job 2 was then automated. Now Job 2 requires only 3 hours of direct labor but 5 hours of mechanical processing. As a result, total overhead increases to $20,400. Select the incorrect statement from the following.

Multiple Choice The use of machine hours as the allocation base would significantly improve the overhead cost allocations. The increased overhead costs associated with automation should be allocated to both jobs. While the actual processing of Job 1 was not affected by automation, it received an increase of $8,520 in its overhead allocation. Automation and the costing system used by the company cause the cost of Job 1 to be significantly overstated.