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

Total

Revenue

$

2,000,000

$

1,830,000

$

3,830,000

Direct materials

600,000

549,000

1,149,000

Direct labor

400,000

183,000

583,000

Overhead costs

Administration

174,900

Production setup

449,500

Quality control

280,000

Distribution

702,000

Operating profit

$

491,600

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

95

Performing quality control

Number of inspections

200

200

Distribution

Number of units shipped

1,700

6,100

(c)

Restate the income statement for EZ-Seat using direct labor costs as the only overhead allocation base. (Do not round intermediate calculations. Round "Overhead costs" to the nearest dollar.)

Account	Ergo	Standard	Total
Sales revenue	$2,000,000	$1,830,000	$3,830,000
Direct materials	$600,000	$549,000	$1,149,000
Direct labor	$400,000	$183,000	$583,000
Overhead costs	?	?	$1,606,400
Operating profit	?	?	$491,600

Overhead costs aren't equal to $1,102,161 & $504,239!