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Unformatted text preview: direct labor, even though this correlation does not exist, experience significant product-cost distortions. To avoid such distortions, many companies now use machine hours as the basis on which to allocate overhead in an automated manufacturing environment. But even machine hours may not suffice as the only plantwide basis for allocating all overhead. If the manufacturing process is complex, then only multiple allocation bases can result in more accurate product-cost computations. In such situations, managers need to consider an overhead cost allocation method that uses multiple bases. That method is activity-based costing ....
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- Fall '11