Miller Company Makes Two Types of Chairs

question 42

Multiple Choice

Miller Company makes two types of chairs.One of the chairs is a rocking chair.The other is a straight-back chair.Both chairs are made by hand.Miller Company uses a companywide overhead rate that is based on direct labor hours to assign overhead costs to the two products.If Miller automates the production of straight-back chairs and continues to use direct labor hours as a companywide allocation basis:

• A) rocking chairs will be overcosted.
• B) straight-back chairs will be overcosted.
• C) rocking chairs will be undercosted.
• D) there should be no impact on unit cost.

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