Koontz Company manufactures two models of industrialcomponents—a Basic model and an Advanced Model. The companyconsiders all of its manufacturing overhead costs to be fixed andit uses plantwide manufacturing overhead cost allocation based ondirect labor-hours. Koontz’s controller prepared the segmentedincome statement that is shown below for the most recent year (heallocated selling and administrative expenses to products based onsales dollars):

	Basic			Advanced			Total
Number of units produced and sold		20,000			10,000		30,000
Sales	$	3,000,000		$	2,000,000	$	5,000,000
Cost of goods sold		2,300,000			1,350,000		3,650,000
Gross margin		700,000			650,000		1,350,000
Selling and administrative expenses		720,000			480,000		1,200,000
Net operating income (loss)	$	(20,000	)	$	170,000	$	150,000

Direct laborers are paid $20 per hour. Direct materials cost $40per unit for the Basic model and $60 per unit for the Advancedmodel. Koontz is considering a change from plantwide overheadallocation to a departmental approach. The overhead costs in thecompany’s Molding Department would be allocated based onmachine-hours and the overhead costs in its Assembly and PackDepartment would be allocated based on direct labor-hours. Toenable further analysis, the controller gathered the followinginformation:

	Molding			Assemble and Pack			Total
Manufacturing overhead costs	$	787,500		$	562,500	$	1,350,000
Direct labor hours:
Basic		10,000			20,000		30,000
Advanced		5,000			10,000		15,000
Machine hours:
Basic		12,000			-		12,000
Advanced		10,000			-		10,00

2. Using a departmental approach:

a. Calculate the departmental overhead rates.

b. Calculate the total amount of overhead that would be assignedto each product.

c. Using your departmental overhead cost allocations, redo thecontroller’s segmented income statement (continue to allocateselling and administrative expenses based on sales dollars).