Morris Company Allocates Overhead on the Basis of Direct Labor

question 101

Multiple Choice

Morris Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $12,800 to two different jobs as follows: Job 1: (10 hours) = $6,400; Job 2: (10 hours) = $6,400
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 increases to $17,000. With the change in the production process for Job 2, the amount of overhead assigned to:

• A)each product will increase.
• B)Job 1 will decrease.
• C)each product will decrease.
• D)Job 1 will increase.

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Definitions:

Entails Risk

Involves exposure to danger, harm, or loss as a consequence of an action or decision.

Dominant Manager

A key figure in an organization or team who holds primary authority and influence, guiding and controlling decision-making processes and direction.

Risks

The potential for events or actions to lead to a loss or an unwanted outcome, often evaluated in terms of probability and severity.

Modern World

The era characterized by rapid technological progress, industrialization, and significant changes in social, economic, and political structures, typically associated with the period from the 18th century onwards.