Consider three very similar companies. Company A allocates manufacturing overhead to jobs using labor hours as the allocation base; Company B allocates manufacturing overhead to jobs using machine hours as the allocation base; and Company C allocates manufacturing overhead to jobs using material cost as the allocation base.
Required:
Explain why, in spite of the fact that the companies are very similar, supervisors at Company A are very focused on controlling labor whereas supervisors at Company B are very focused on controlling machine run time and supervisors at Company C are very focused on controlling material costs. Use the concept of You get what you measure in your answer.