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The Carolina Furniture Company manufactures kitchen cabinets. The company has always used direct labor cost to allocate overhead to its two cabinet lines, Heritage and Contemporary. The manufacture of both lines has been labor intensive. Recently, the company automated production of its Contemporary line of cabinets. It continues to use labor dollars as the overhead allocation base for both lines. This practice will likely result in which of the following?
a. Overhead cost will be allocated accurately between the two lines.
b. Too much overhead cost will be allocated to the Heritage line.
c. Too much overhead cost will be allocated to the Contemporary line. d. b and c.
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An increase in the activity level within the relevant range results in:
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