Problem 9-53 (Algo) Comparative Income Statements and Management Analysis (LO 9-1, 5, 6) Normandy Office Products (NOP) makes two types of office desks, Manager and Executive. The Executive model is adjustable using electric motors and is made with upgraded materials. The manufacturing process for the Executive model is more complex than that for the Manager model, requiring more frequent inspections and shorter production runs. The Manager model is a basic desk, using good, but easy to work with, materials, and is simpler to manufacture. NOP's results for the last fiscal year are shown in the following statement. Sales revenue Direct materials Direct labor Overhead costs Administration. Machine setup Inspection. Packing and shipping Operating profit Activity Machine setup NORMANDY OFFICE PRODUCTS Income Statement Inspection Packing and shipping Manager $ 1,017,600 180, 200 127,200 Executive $ 1,128,900 190,800 159,000 Total $ 2,146,500 NOP currently uses labor costs to allocate all overhead, but management 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 costs: Cost Driver Number of production runs Number of inspections Number of units shipped 371,000 286,200 228,960 381,600 254,400 508,800 $ 115,540 Activity Level Manager Executive 200 100 200 400 12,000 3,000 Required: a. Prepare the product line income statement using the proposed activity bases. c. Restate the product line income statement for Normandy Office Products using direct labor costs as the only overhead allocation base.