Morelli Electric Motor Corporation manufactures electric motors for commercial use. The company produces three models, designated as standard, deluxe, and heavy-duty. The company uses a job-order cost-accounting system with manufacturing overhead applied on the basis of direct-labor hours. The system has been in place with little change for 25 years. Product costs and annual sales data are as follows: Standard Model Annual sales (units) Product costs: 17,000 Deluxe Model 1,700 Heavy-Duty Model 8,500 Raw material $ 15 $ 30 $ 40 Direct labor Manufacturing overhead* 8 (0.5 hr. at $16) 50 16 (1 hr. at $16) 100 16 (1 hr. at $16) 100 Total product cost $ 73 $ 146 $ 156 *The calculation of the predetermined overhead rate is as follows: Manufacturing-overhead budget: Depreciation, machinery Maintenance, machinery Depreciation, taxes, and insurance for factory Engineering Purchasing, receiving and shipping Inspection and repair of defects Material handling Miscellaneous manufacturing overhead costs Total Direct labor budget: Standard model: 13,000 hours Deluxe model: 3,000 hours Heavy-duty model: 13,000 hours Total 29,000 hours $1,310,000 110,000 210,000 250,000 130,000 310,000 360,000 220,000 $2,900,000