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 $3,000, eee $4,800,000 900, eee 1,200, eee 600,000 400,eee Total $7,88,888 2,100,000 1, e88,888 Sales revenue Direct materials Direct labor Overhead costs Administration Production setup Quality control Distribution Operating profit 688,888 465,000 384,800 711,000 $1,820,000 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 Standard 50 lee 190 198 1,480 6,500 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.) Account Standard Total Sales revenue $ Ergo 3,000,000 900.000 $ S Direct materials $ $ 4,000,000 1.200.000 400.000 S 7.000.000 2.100.000 1.000.000 600,000 Direct labor Overhead costs: Administration 600.000 Production setup 485.000 ulit natal Innnn 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 $3,800, eee $4,000,eee 9ee, eee 1,200,000 600,eee 4ee,eee Total $7,000,000 2,100,eee 1,088,888 Sales revenue Direct materials Direct labor Overhead costs Administration Production setup Quality control Distribution Operating profit 600,000 465,800 384, eee 711,80 $1,820,000 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 Standard 50 100 190 190 1,400 6,500 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.) Account S Ergo 3.000.000 900.000 Sales revenue Direct materials s Standard $ 4,000,000 1,200,000 400.000 Total 7.000.000 2.100.000 Direct labor 600.000 1.000.000 Overhead costs Operating profit (loss)
