EZ-Seat, Inc., manufactures two types of reclining chairs, Standard and Ergo. Ergo provides support for the body through a complex set of sensors and requires great care in manufacturing to avoid damage to the material and frame. Standard is a conventional recliner, uses standard materials, and is simpler to manufacture. EZ-Seat's results for the last fiscal year are shown in the statement below. EZ-SEAT, INC Income Statement Ergo $3,000,000 900,000 Standard Total $7,000,000 2,100,000 1,000,000 Sales revenue $4.000,000 1,200,000 400,000 Direct materials Direct labor 600,000 Administration 700,000 450,000 280.000 648,000 $1,822,000 Production setup Quality control Distribution Operating profit EZ-Seat currently uses labor costs to allocate all overhead, but management is considering implementing an activity-based costing system. After interviewing the sales and production staff, management decides to allocate administrative costs on the basis of direct labor costs but to use the following bases to allocate the remaining costs: Activity Level Standard Activity Base Cost Driver Ergo Number Number of inspections Number of units shipped uns Performing quality control Distribution 200 200 1,600 6,500 Required: a. Complete the income statement using the preceding activity bases. (Do not round intermediate calculations.) Account Ergo Standard Total Sales revenue 7,000,000 4,000,000 $ 3,000,000 Direct materials 1,200,000 $ $ 900,000 2,100,000 Direct labor 600,000 400,000 1.000,000 Overhead costs: Administration 700,000 Production setup 450,000 280,000 Quality control Distribution 648,000 Total overhead costs 2,078,000 2,400,000 $ 1,822,000 1,500,000 Operating profit (loss) c. Restate the income statement for EZ-Seat using direct labor costs as the only overhead allocation base. (Do not round intermediate calculations.) Ergo Account Standard Total Sales revenue 4,000,000 $ 3,000,000 7,000,000 Direct materials 1,200,000 900,000 2,100,000 600,000 400,000 Direct labor 1,000,000 Overhead costs 0 1,500,000 $ Operating profit (loss) 2,400,000 S 3,900,000