Dreamy Company uses direct labor hours to allocate overhead toall of its jobs. It allocates overhead costs of $12,600 to two differentjobs as follows:Job 1: (12 hours) = $6,300; Job 2: (12 hours) = $6,300The production process for Job 2 was then automated. Now Job 2requires only 3 hours of direct labor but 5 hours of mechanicalprocessing. As a result, total overhead increases to $17,400. Selectthe incorrect statement from the following.Multiple ChoiceThe use of machine hours as theallocation base would significantlyimprove the overhead cost allocations.Automation and the costing system usedby the company cause the cost of Job 1 tobe significantly overstated.While the actual processing of Job 1 wasnot affected by automation, it received anincrease of $7,620 in its overheadallocation.

Step 1:The incorrect statement is:"While the actual processing of Job 1 was not affected by…

Answered: Dreamy Company uses direct labor hours…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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