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Dreamy Company uses direct labor hours to allocate overhead to all of its jobs. It allocates overhead costs of $12,600 to two different jobs as follows: Job 1: (12 hours) = $6,300; Job 2: (12 hours) = $6,300 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 $17,400. 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. Automation and the costing system used by the company cause the cost of Job 1 to be significantly overstated. While the actual processing of Job 1 was not affected by automation, it received an increase of $7,620 in its overhead allocation.

Dreamy Company uses direct labor hours to allocate overhead to all of its jobs. It allocates overhead costs of $12,600 to two different jobs as follows: Job 1: (12 hours) = $6,300; Job 2: (12 hours) = $6,300 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 $17,400. 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. Automation and the costing system used by the company cause the cost of Job 1 to be significantly overstated. While the actual processing of Job 1 was not affected by automation, it received an increase of $7,620 in its overhead allocation.

Practical Management Science
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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Dreamy Company uses direct labor hours to allocate overhead to all of its jobs. It allocates overhead costs of $12,600 to two different jobs as follows: Job 1: (12 hours) = $6,300; Job 2: (12 hours) = $6,300 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 $17,400. 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. Automation and the costing system used by the company cause the cost of Job 1 to be significantly overstated. While the actual processing of Job 1 was not affected by automation, it received an increase of $7,620 in its overhead allocation.
Transcribed Image Text:Dreamy Company uses direct labor hours to allocate overhead to all of its jobs. It allocates overhead costs of $12,600 to two different jobs as follows: Job 1: (12 hours) = $6,300; Job 2: (12 hours) = $6,300 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 $17,400. 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. Automation and the costing system used by the company cause the cost of Job 1 to be significantly overstated. While the actual processing of Job 1 was not affected by automation, it received an increase of $7,620 in its overhead allocation.
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