Question
Morris Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $12,800 to two different jobs as follows: Job 1:
Morris Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $12,800 to two different jobs as follows: Job 1: (10 hours) = $6,400; Job 2: (10 hours) = $6,400 The production process for Job 2 was then automated. Now Job 2 requires only two hours of direct labor but four hours of mechanical processing. As a result, total overhead increases to $17,000. With the change in the production process for Job 2:
The amount of overhead assigned to Job 1 will decrease.
The amount of overhead assigned to each product will decrease.
The amount of overhead assigned to Job 1 will increase.
The amount of overhead assigned to each product will increase.
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