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Fabricator Inc., a specialized equipment manufacturer, uses a job order costing system. The overhead is allocated to jobs on the basis of direct labor hours. The overhead rate is now $ 3,000 per direct labor hour. The design engineer thinks that this is illogical. The design engineer has stated the following: Our accounting system doesnâ€™t make any sense to me. It tells me that every labor hour carries an additional burden of $3,000. This means that while direct labor makes up only 5% of our total product cost, it drives all our costs. In addition, these rates give my design engineers incentives to â€œdesign outâ€ direct labor by using machine technology. Yet, over the past years as we have had less and less direct labor, the overhead rate keeps going up and up. I wonâ€™t be surprised if next year the rate is $4,000 per direct labor hour. Iâ€™m also concerned because small errors in our estimates of the direct labor content can have a large impact on our estimated costs. Just a 30-minute error in our estimate of assembly time is worth $1,500. Small mistakes in our direct labor time estimates really swing our bids around. I think this puts us at a disadvantage when we are going after business.1. What is the engineerâ€™s concern about the overhead rate going â€œup and upâ€?2. What did the engineer mean about the large overhead rate being a disadvantage when placing bids and seeking new business?3. What do you think is a possible solution?