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 fxed 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 Nunber of units produced and sold 20,e 10,000 30, 000 $5,000,00 1,358, 000 ,650, 650, 1,15e, 489,00 1,20,000 S (20,00e) s 170,e0e s 15e,000 Sales $3,000,eee 2,30,ee Cost of goods sold Gross nargin Selling and adninistrative expenses 720,0e Net operating incone (less) 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: Assenble Molding S 787,5ee and Pack $ 562,500 $1,3se, e0e Total Ranufacturing overhead costs Direct labor hours Basic 18,000 5,e 20,00 10,00 30, 00 15, Advanced Hachine hours: Basie 12,000 10,00 12,000 10,000 Advanced Required: 1 Using the plantwide approach: a. Calculate the plantwide overhead rate. b. Calculate the amount of overhead that would be assigned to each product. 2. Using a departmental approach a. Calculate the departmental overhead rates. b. Calculate the total amount of overhead that would be assigned to each product. c. Using your departmental overhead cost allocations, redo the controller's segmented income statement (continue to allocate selling and administrative expenses based on sales dollars). 3. Koontz's production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead cost to five activity cost pools as follows: Hanufacturing Overhead Activity Cost Pool Machining Assenble and pack Order processing Setups Other (unused capacity) Activity easure Machine-hours in Molding Direct labor-hours in Assenble and Pack $ 417,s00 282,500 230, e00 Number of customer orders Setup hours 34,00 $1,350,000 She also determined that the average order size for the Basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each order. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model. The company pays a sales commissions of 5% for the Basic model and 10% for the Advanced model. Iits traceable fixed advertising costs include $150.000 for the Basic model and $200.000 for the Advanced model. The remainder of the company's selling and administrative costs are organization-sustaining in nature. Using the additional information provided by the production manager, calculate: a. An activity rate for each activity cost pool. b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach. c The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. 4. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Exhibit 68 Hint Organize all of the company's costs into three categories: variable expenses, traceable fixed expenses. and common fixed expenses)