Answered

Welcome to Westonci.ca, the ultimate question and answer platform. Get expert answers to your questions quickly and accurately. Connect with a community of experts ready to provide precise solutions to your questions quickly and accurately. Get precise and detailed answers to your questions from a knowledgeable community of experts on our Q&A platform.

Hazel Company allocates overhead based on direct labor hours. It allocates overhead costs of $16,200 to two different jobs as follows:
Job 1: (12 hours) = $8,100; Job 2: (12 hours) = $8,100
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 $21,000. Select the incorrect statement from the following.
A. While the actual processing of Job 1 was not affected by automation, it received an increase of $9,900 in its overhead allocation.
B. The use of machine hours as the allocation base would significantly improve the overhead cost allocations.
C. The increased overhead costs associated with automation should be allocated to both jobs.
D. Automation and the costing system used by the company cause the cost of Job 1 to be significantly overstated.

Sagot :

anthougo

Answer:

Hazel Company

The incorrect statement is:

A. While the actual processing of Job 1 was not affected by automation, it received an increase of $9,900 in its overhead allocation.

Explanation:

Option A is the correct answer because Job 1's overhead cannot increase by $9,900.  Therefore, this purported increase cannot be verified as correct.  Most likely the overhead allocation of Job 1 will decrease since Job 2 has another basis for allocating overhead to it, which Job 1 does not incur.  Overhead allocation using ABC system is more efficient than the traditional method of using a predetermined rate because overhead is now allocated based on consumption rather than using some arbitrary basis.

Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.