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 following statement. Sales revenue Direct materials Direct labor Overhead costs Administration Production setup Quality control Distribution Operating profit EZ-SEAT, INC. Income Statement Ergo $3,000,000 900,000 600,000 Standard $4,000,000 1,200,000 400,000 Total $7,000,000 2,100,000 1,000,000 600,000 496,000 315,000 770,000 $1,719,000 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 Setting up Performing quality control Distribution Cost Driver Number of production runs Number of inspections Number of units shipped Ergo Standard 60 100 210 1,600 210 6,100 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. Required A Required C Complete the income statement using the preceding activity bases. (Do not round intermediate calculations.) Account Sales revenue Direct materials Direct labor Ergo Standard Total $ 3,000,000 $ 4,000,000 $ 7,000,000 $ 900,000 $ 1,200,000 $ 2,100,000 600,000 400,000 1,000,000 Overhead costs: Administration 360,000 240,000 600,000 Production setup 186,000 310,000 496,000 Quality control 157,500 157,500 315,000 Distribution 160,000 385,000 770,000 Total overhead costs 863,500 1,092,500 1,956,000 Operating profit (loss) $ 636,500 $ 1,307,500 $ 1,944,000 < Required A Required C > Required A Required C Restate the income statement for EZ-Seat using direct labor costs as the only overhead allocation base. (Do not round intermediate calculations.) Account 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 1,173,600 x 782,400 x 1,956,000 Operating profit (loss) $ 326,400 $ 1,617,600 $ 1,944,000 < Required A Required C >