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 statement below.

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 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 600,000 Production setup 480,000 Quality control 304,000 Distribution 729,000 Operating profit $1,787,000 E a 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 Standard 60 100 190 190 1,800 6,300