Perez Company Manufactures Two Products

Essay

Perez Company manufactures two products.Making Product A requires 6,000 hours of labor and Product B requires 4,000 hours of labor.Perez undertakes an automation program that reduces the consumption of labor required by Product A to only 3,000 hours of labor.Product B is not affected by the automation process.Overhead cost prior to the automation totaled $30,000.After automation,overhead cost amounted to $56,000.Perez uses direct labor hours as a company-wide allocation base before and after the automation.
Required:
1)Compute the amount of overhead costs allocated to both products before automation.
2)Compute the amount of overhead costs allocated to both products after automation.
3)Is direct labors hours a good choice for allocation after the automation? Why or why not?