Commonwealth Devices makes three wearable fitness devices at its Lake Plant: CFit-1, CFit-2, and CFit-Xtra. The company has for many years allocated overhead to products using machine-hours. Last year, the Lake Plant produced and shipped 8,000 units of CFit-1, 14,000 units of CFit-2, and 8,000 units of CFit-Xtra. The plant recorded the following revenues and costs:

COMMONWEALTH DEVICES
Lake Plant
Income Statement
	CFit-1	CFit-2	CFit-Xtra	Total
Sales revenue	$ 864,000	$ 1,260,000	$ 1,296,000	$ 3,420,000
Direct costs
Direct materials	192,000	280,000	240,000	712,000
Direct labor	40,000	52,500	120,000	212,500
Variable overhead
Machine setup				192,000
Order processing				144,000
Materials handling				192,000
Machining				96,000
Shipping				72,000
Contribution margin				$ 1,799,500
Plant administration costs				1,400,000
Gross profit				$ 399,000

The Lake Plant has put together an employee team to recommend a possible activity-based cost system, including cost allocation bases. The employee team recommends the following:

Activity	Cost Driver	CFit-1	CFit-2	CFit-Xtra
Machine setup	Setups	80	160	160
Order processing	Orders received	9	20	11
Materials handling	Material movements	3,000	4,500	5,000
Machining	Machine-hours	10,000	16,000	24,000
Shipping	Units shipped	8,000	14,000	8,000

The employee team further recommends that administration costs not be allocated to products.

Required:

a. Using machine-hours to allocate overhead, complete the income statement for the Lake Plant. Do not allocate administrative costs to products.

b-1. Compute the cost driver rates.

b-2. Complete the income statement using the activity-based costing method suggested by the employee team.