Koontz Company manufactures two models of industrial components-a Basic model and an Advanced Model. The company considers 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): Number of units produced and sold Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income (loss) Basic 20,000 Advanced 10,000 Total 30,000 $3,000,000 $2,000,000 $ 5,000,000 2,300,000 1,350,000 700,000 650,000 720,000 480,000 3,650,000 1,350,000 1,200,000 $ (20,000) $ 170,000 $ 150,000 Direct laborers are paid $20 per hour. Direct materials 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 Assemble and Pack Department would be allocated based on direct labor-hours. To enable further analysis, the controller gathered the following information: Manufacturing overhead costs Direct labor hours: Basic Advanced Molding $ 787,500 Assemble and Pack Total $ 1,350,000 10,000 5 $ 562,500 20,000 10 aa 30,000 15 000