Keene Company Allocates Overhead on the Basis of Direct Labor

question 88

Multiple Choice

Keene Company allocates overhead on the basis of direct labor hours.It allocates overhead costs of $8,000 to two different jobs as follows: Job 1: (10 hours) = $4,000;Job 2: (10 hours) = $4,000
The production process for Job 2 was then automated.Now Job 2 requires only two hours of direct labor but four hours of mechanical processing.As a result,total overhead increased to $12,000.How much overhead cost will be assigned to Job 1 after automation?

• A) $10,000
• B) $6,000
• C) $4,000
• D) $2,000

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