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3-18Some manufacturing firmsareswitching from direct-labor hours to machine hours or throughput time as the basis for overhead applicationas a result of increased automation in their factories. With increased automation comes a reduction in the amount ofdirect laborused in theproductionprocess.

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Some manufacturing firms are switching from direct-labor hours to machine hours or throughput time as the basis for overhead application as a result of increased automation in their factories. With increased automation comes a reduction in the amount of direct labor used in the production process. In such cases, direct labor may cease to be a cost driver that varies in a pattern similar to the way in which manufacturing-overhead costs are incurred.