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) 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 1,350,000 650,000 480,000 Net operating income (loss) 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 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 787,500 Manufacturing overhead costs Direct labor hours: $ 562,500 1,350,000 Basic Advanced 10,000 5, 000 20,000 10,000 30,000 15,000 Machine hours: Basic Advanced 12,000 10,000 12,000 10,000