Final answer:
Stenback Recliners most likely allocates overhead based on machine hours, as the company focuses on labor and machine costs in their decision-making, especially when considering changes in labor costs and technology adoption.
Step-by-step explanation:
Stenback Recliners allocates overhead based on various potential drivers, but to identify the correct one among the options given (Direct labor hours, Yards of direct materials, Machine hours, Number of units sold), one must understand the company's costing strategy.
Based on the provided information, the company seems to consider the impact of labor hours and machine hours closely, especially when labor costs change due to union negotiations or when decisions about technology adoption are being made. Since the details emphasize the role of machine hours and labor, and with the assertion that a shift towards more machinery and less labor is financially beneficial, machine hours would logically be the overhead allocation base that aligns with the situations described.