Direct Labor Hour Costs
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Co allocates overhead on the basis of direct labor hours. It allocates overhead costs of $4,000 to two different jobs as follows:
Job 1:(10 hours)=$2,000
Job 2:(10 hours)-$2,000
Assume, that the production process for Job 1 was automated. Now Job 1 requires only 2 hours of direct labor but 4 hours of mechanical processing. As a result, total overhead increased to $6,000. How much overhead costs will be assigned to Job 2 after automation?
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