Question

Morris Company allocates overhead based on direct labor hours. It allocates overhead costs of $14,600 to two different jobs as follows:

Job 1: (10 hours) = $7,300; Job
2: (10 hours) = $7,300 The production process for Job 2 was then automated. Now Job 2 requires only 2 hours of direct labor but 3 hours of mechanical processing. As a result, total overhead increases to $20,100. With the change in the production process for Job 2, the amount of overhead assigned to:

Answer 1

To accurately allocate the increased overhead of $20,100 post-automation, more information about the new allocation base and rate is required, which is not provided. The previous allocation was based on direct labor hours, but automation often changes the allocation method to include machine hours.

Step-by-step explanation:

Understanding Overhead Allocation in Automated Production

When the production process for Job 2 was automated in Morris Company, the direct labor required dropped to 2 hours from 10 hours, but it incorporated 3 hours of mechanical processing. With a total overhead increase to $20,100, calculating the overhead assigned to each job after automation requires the following considerations:

Previously, overhead was allocated based on direct labor hours, evenly distributing $14,600 between two jobs each requiring 10 hours. This allocated $7,300 in overhead to each job. Under the new conditions, the automation likely changes the basis for the allocation of overhead costs, possibly shifting towards a method that includes both direct labor hours and machine hours.

However, to solve this question, we would need information on the new allocation base and rate. Without this information, we cannot accurately provide the overhead costs assigned to each job post-automation. Typically, companies would analyze direct labor and machine hours, along with their respective costs, to determine a new rate and then allocate overhead accordingly.