Reference no: EM13566718

Hazell Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $4,000 to two different jobs as follows: Job 1: (10 hours) = $2,000 Job 2: (10 hours) = $2,000 Assume that, then, the production process for Job 1 was automated. Now Job 1 requires only 2 hours of direct labor but four hours of mechanical processing. As a result, total overhead increases to $6,000. Select the incorrect statement from the following.

A) While the actual processing of Job 2 was not affected by automation, it received an increase of $3,000 in its overhead allocation.

B) The increased overhead costs associated with automation should be allocated to all jobs.

C) Automation and the costing system used by the company causes the cost of Job 2 to be significantly overstated.

D) The use of machine hours as the allocation base would significantly improve the overhead cost allocations.