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 Standard $2,925,000 $2,760,000 558,00 580, eee 400, eee 2 ee, eee Total $5,685,800 1,850, eee 600, eee Sales revenue Direct materials Direct labor Overhead costs Administration Production setup Quality control Distribution Operating profit 468, eee 1,880, 720, eee 1,440, eee $ 327, eee 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 50 100 Performing quality control Number of inspections 200 200 Distribution Number of units shipped 1,582 6,eee Number Cost Drive 3 quality 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 this question by entering your answers in the tabs below. Required A Required Complete the income statement using the preceding activity bases. (Do not round Intermediate calculations. Input all amounts as positive values.) Standard Total Account Sales revenue Direct materials $ Ergo 2,925,000 550,000 400,000 $ $ 2,760,000 500,000 200,000 $ $ 5,685,000 1,050,000 600,000 Direct labor Overhead costs Administration Production setup 468 000 1,080,000 720,000 1440 000 Quality control Distribution Total overhead costs Operating profitoss) $ 1975,000 $ 2,000,000 $ 4035 000 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 this question by entering your answers in the tabs below. Required A Required Restate the income statement for EZ-Seat using direct labor costs as the only overhead allocation base. (Do not round Intermediate calculations. Input all amounts as positive values.) Account S $ Sales revenue $ $ Ergo 2.925,000 550.000 400.000 tandard 2,760,000 500,000 200,000 Total 5,685,000 1,050,000 600,000 Direct materials Direct labor Overhead costs Operating profit (loss) S 1975.000 $ 2.060,000 S 4.035,000
