Elis Equipment $($EE$),$ manufactures three models of lawn tractor. EE$-1000,$ EE$-1800,$ and EE$-2800.$ Because of the different materlals used, production processes for each model differ significantly in terms of machine types and time requirements. Once parts are produced, however, assembly time per unit required for each type of tractor Is similar. For this reason. EE allocates overhead on the basls of machine$-$hours. Last quarter, the company shipped $8,000$ EE$-1000$s$,3,200$ EE$-1800$s$,$ and $800EE-2800s.$ The revenues and expenses for the last quarter were as follows:

The plant manager asked the plant controller about the possibility of adopting ABC. After consulting with the production supervisors in the plant, the controller recommended the following:

Activity

Setting up machines

Quality testing

Painting

operating equipert

shlppins

$cosL$ Driver

Number of production t'uns

Nuliber of thets

Uricts shipped

Machine$-$hours

Nuber of units shipped

$\backslash$table$[[,[$I$]-1860,$F$.],[154,238,308],[320,200,80],[8\mathrm{.}000,3,200,860],[\backslash$table$[[5\mathrm{.}006],[8\mathrm{.}000]],8,690,12,600]]$

The controlier also recommended that facility administration and miscellaneous fixed overhead costs not be appled to products, especlally in the initial experiment with ABC

Required:

a$.$ Using machine$-$hours to allocate production overhead. complete the Income statement for Ellis Equlpment. Follow the controller's recommendation and do not attempt to aliocate facility administration or miscellaneous fixed overhead.

b$.$ Complete the income statement using the bases recommended by the controller.

c$.$ How might activity$-$based costing result in better decisions by Ellis Equlpment's management?