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 Seats results for the last fiscal year are shown in the following statement EZ SEAT, INC Income Statement Ergo Standard Total Sales revenue $ 3,000,000 $ 4,000,000 $ 7,000,000 Direct materials 900,000 1,200,000 2,100,000 Direct labor 600,000 400,000 1,000,000 Overhead costs Administration 800,000 Production setup 496,000 Quality control 285,000 Distribution 711,000 Operating profit $ 1,608,000 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 Activity Base Cost Driver Ergo Standard Setting up Number of production runs 60 100 Performing quality control Number of inspections 190 190 Distribution Number of units shipped 1,500 6,400 Required a Complete the income statement using the preceding activity bases c Restate the income statement for EZ Seat using direct labor costs as the only overhead allocation base Complete the income statement using the preceding activity bases (Do not round intermediate calculations ) Account Standard Total Sales revenue S s Ergo 3 000 000 900,000 600 000 7 000 000 2 100 000 $ 4,000,000 S 1 200,000 $ 400 000 $ 1 000 000 800 000 Direct materials Direct labor Overhead costs Administration Production setup Quality control Distribution Total overhead costs Operating profit (loss) 496 000 285,000 711,000 Restate the income statement for EZ Seat using direct labor costs as the only overhead allocation base (Do not round intermediate calculations ) Standard Total Account Sales revenue S Ergo 3 000 000 900 000 S 4 000 000 S 1 200,000 400,000 7,000,000 2 100 000 1 000 000 600,000 Direct materials Direct labor Overhead costs Operating profit (loss)

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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

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-Seats results for the last fiscal year are shown in the following statement.

EZ-SEAT, INC. Income Statement
	Ergo		Standard		Total
Sales revenue	$	3,000,000	$	4,000,000	$	7,000,000
Direct materials		900,000		1,200,000		2,100,000
Direct labor		600,000		400,000		1,000,000
Overhead costs
Administration						800,000
Production setup						496,000
Quality control						285,000
Distribution						711,000
Operating profit					$	1,608,000

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
Activity Base	Cost Driver	Ergo	Standard
Setting up	Number of production runs	60	100
Performing quality control	Number of inspections	190	190
Distribution	Number of units shipped	1,500	6,400

Required:

a. Complete the income statement using the preceding activity bases.

c. Restate the income statement for EZ-Seat using direct labor costs as the only overhead allocation base.

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Complete the income statement using the preceding activity bases. (Do not round intermediate calculations.) Account Standard Total Sales revenue S s Ergo 3.000.000 900,000 600.000 7.000.000 2.100.000 $ 4,000,000 S 1.200,000 $ 400.000 $ 1.000.000 800.000 Direct materials Direct labor Overhead costs: Administration Production setup Quality control Distribution Total overhead costs Operating profit (loss) 496.000 285,000 711,000 Restate the income statement for EZ-Seat using direct labor costs as the only overhead allocation base. (Do not round intermediate calculations.) Standard Total Account Sales revenue S Ergo 3.000.000 900.000 S 4.000.000 S 1.200,000 400,000 7,000,000 2.100.000 1.000.000 600,000 Direct materials Direct labor Overhead costs Operating profit (loss)