Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company conslders all of its manufacturing overhead costs to be fixed and it uses plantwide manufacturing overhead cost allocation based on direct labor-hours. Koontz's controller prepared the segmented income statement that is shown below for the most recent year (he allocated selling and administrative expenses to products based on sales dollars): Basic Advanced Total Number of units produced and sold 20,000 10,000 30,000 Sales Cost of goods sold Gross margin Selling and administrative expenses $3,000,000 2,300,000 700,000 720,000 $2,000,000 $5,000,000 3,650,000 1,350,000 1,200,000 $ (20,000) 170,000 150,000 ,350,000 650,000 480,000 Net operating income (loss) Direct laborers are paid $20 per hour. Direct materlals cost $40 per unit for the Basic model and $60 per unit for the Advanced model. Koontz is considering a change from plantwide overhead allocation to a departmental approach. The overhead costs in the company's Molding Department would be allocated based on machine-hours and the overhead costs in its Assembly and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Assemble and Pack Molding Total Manufacturing overhead costs Direct labor hours: 787,500 S 562,500 $1,350,000 Basic Advanced 10,000 5,000 20,000 10,000 30,000 15,000 Machine hourst Basic Advanced 12,000 10,000 12,000 10,000