Question: Emco ltd. uses direct labour cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the

Emco ltd. uses direct labour cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company misclassified a portion of direct labour cost as indirect labour. What would be the effect of this misclassification on the predetermined overhead rate? Explain your answers.

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