Hazel Company allocates overhead based on direct labor hours. It allocates overhead costs of $13,200 to two different jobs as follows:

Job 1: (10 hours) = $6,600; Job 2: (10 hours) = $6,600

The production process for Job 2 was then automated. Now Job 2 requires only 2 hours of direct labor but 4 hours of mechanical processing. As a result, total overhead increases to $17,400. Select the incorrect statement from the following.

Multiple Choice

• While the actual processing of Job 1 was not affected by automation, it received an increase of $7,900 in its overhead allocation.
• The use of machine hours as the allocation base would significantly improve the overhead cost allocations.
• Automation and the costing system used by the company cause the cost of Job 1 to be significantly overstated.
• The increased overhead costs associated with automation should be allocated to both jobs.