Wood Company makes two types of chairs. One of the chairs is a rocking chair. The other is a straight-back chair. Both chairs are made by hand. Wood Company uses a companywide overhead rate that is based on direct labor hours to assign overhead costs to the two products. If Wood Company automates the production of straight-back chairs and continues to use direct labor hours as a companywide allocation basis:
a. rocking chairs will be undercosted
b. there should be no impact on unit cost
c. straight back chairs will be overcosted
d. rocking chairs will be overcosted.
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