Pepper's Products manufactures and sells two types of chew toys for pets-Squeaky and Silent. In May, Pepper's Products had the following costs and revenues. Pepper's Products Income Statement For the Month of May Squeaky Silent Sales revenue $137,000 $ 155,000 Direct materials 19,000 21,000 Direct labor 80,000 20,000 Overhead costs Administration Production setup Quality control Distribution Operating profit Total $292,000 40,000 100,000 20,000 56,000 20,000 19,000 $ 37,000 Pepper's Products currently uses labor costs to allocate all overhead but 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 overhead. Activity Setting up Performing quality control Distribution Cost Driver Number of production runs Number of inspections Number of units shipped Activity Level Squeaky Silent 10 18 40 40 70,000 120,000 Required: a. Complete the income statement using the preceding activity bases. c. Restate the income statement for Pepper's Products using direct labor costs as the only overhead allocation base