QUESTION 4: Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. An absorption costing income statement for the most recent period is shown below: Precision Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $1,700,000 1,200,000 500,000 550.000 S (50.000) PMI produced and sold 60,000 units of EX300 at a price of $20 per unit and 12,500 units of TX500 at a price of $40 per unit. The company's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: Direct materials Direct labor Ex300 Tx500 Total $366,325$162,550 S 528,875 $120,000 $42,500 Manufacturing overhead Cost of goods sold 162,500 508,625 $1,200,000