MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products using machine-hours. Last year, the company produced 8,000 units of M3100, 17,500 units of M4100, and 10,000 units of M6100 and had the following revenues and costs:

MTI
Income Statement
		M3100		M4100		M6100		Total
Sales revenue	$	9,400,000	$	15,700,000	$	14,200,000	$	39,300,000
Direct costs
Direct materials		3,300,000		4,800,000		3,100,000		11,200,000
Direct labor		610,000		860,000		1,730,000		3,200,000
Variable overhead
Setting up machines								2,352,000
Processing sales orders								1,794,000
Warehousing								2,204,000
Operating machines								1,175,000
Shipping								994,000
Contribution margin							$	16,381,000
Plant administration								6,400,000
Gross profit							$	9,981,000

MTIs controller has heard about activity-based costing and puts together an employee team to recommend cost allocation bases. The employee team recommends the following.

Activity	Cost Driver	M3100	M4100	M6100
Setting up machines	Production runs	9	18	21
Processing sales orders	Sales orders received	170	390	220
Warehousing	Units held in inventory	90	180	110
Operating machines	Machine-hours	6,200	9,900	8,900
Shipping	Units shipped	10,000	17,500	8,000

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

Required:

a. Using machine-hours to allocate overhead, complete the income statement for MTI. Do not allocate plant 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.