A firm has many products, some produced in an automated production process and some produced in a manual production process.Using direct labor hours to assign manufacturing overhead to a product manufactured with a highly automated process is likely to:
A)Overstate overhead of the product.
B)Understate overhead of the product.
C)Overapply overhead to the period.
D)Underapply overhead to the period.
E)Have no effect on overhead of the product.

Question

Quizplus · Accepted Answer

Using direct labor hours to assign overhead in a highly automated process will likely understate overhead because automated processes typically have lower direct labor hours but higher overhead costs related to machinery and technology.

A Firm Has Many Products, Some Produced in an Automated