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. EZ-SEAT, INC. Income Statement Ergo Sales revenue Direct materials Direct labor Overhead costs Administration Production setup Quality control Distribution Operating profit $3,000,000 900,000 600,000 Standard $4,000,000 1,200,000 400,000 Total $7,000,000 2,100,000 1,000,000 500,000 450,000 280,000 624,000 $2,046,000 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 Base Setting up Performing quality control Distribution Cost Driver Number of production runs Number of inspections Number of units shipped Activity Level Ergo 50 200 1,800 Standard 100 200 6,000