Pickle Motorcycles, Inc. (PMI), manufactures three motorcycle models: a cruising bike (Route 66), a street bike (Main Street), and a starter model (Alley Cat). Because of the different materials 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 bike is similar. For this reason, PMI allocates overhead on the basis of machine-hours. Last year, the company shipped 1,100 Route 66s, 1,900 Main Streets, and 4,900 Alley Cats and had the following revenues and expenses.

PICKLE MOTORCYCLES, INC. Income Statement
	Route 66			Main Street			Alley Cat			Total
Sales revenue	$	7,200,000		$	12,200,000		$	9,800,000		$	29,200,000
Direct costs
Direct materials		3,300,000			4,900,000			3,900,000			12,100,000
Direct labor		284,000			471,000			1,030,000			1,785,000
Variable overhead
Machine setup											475,000
Order processing											1,360,000
Warehousing costs											1,974,000
Energy to run machines											884,000
Shipping											700,000
Contribution margin										$	9,922,000
Fixed overhead
Plant administration											1,690,000
Other fixed overhead											2,860,000
Gross profit										$	5,372,000

PMI's chief financial officer (CFO) hired a consultant to recommend cost allocation bases. The consultant recommended the following.

		Activity Level
Activity	Cost Driver	Route 66		Main Street		Alley Cat
Setting up machines	Number of production runs	20		35		40
Processing orders	Number of sales orders received	300		700		700
Warehousing	Number of units held in inventory	250		220		370
Using energy	Machine-hours	10,000		14,000		28,000
Shipping	Number of units shipped	1,000		4,000		9,000

Using machine-hours to allocate production overhead, complete the income statement for Pickle Motorcycles. (See the "using energy" activity for machine-hours.) Do not attempt to allocate plant administration or other fixed overhead. (Round your variable overhead rate to 2 decimal places and your final answers to the nearest whole dollar amount. Input all amounts as positive values.)

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PICKLE MOTORCYCLES
Income Statement
	Route 66	Main Street	Alley Cat	Total
Sales revenue	$7,200,000	$12,200,000	$9,800,000	$29,200,000
Direct costs:
Direct material	3,300,000	4,900,000	3,900,000	12,100,000
Direct labor	284,000	471,000	1,030,000	1,785,000
Variable overhead
Contribution margin	$3,616,000	$6,829,000	$4,870,000	$15,315,000
Fixed overhead:
Plant administration				1,690,000
Other fixed overhead				2,860,000
Gross profit				$5,372,000

Complete the income statement using the bases recommended by the consultant. (Do not round intermediate calculations. Input all amounts as positive values.)

Required:

a. Using machine-hours to allocate production overhead, complete the income statement for Pickle Motorcycles. (See the "using energy" activity for machine-hours.) Do not attempt to allocate plant administration or other fixed overhead.

b. Complete the income statement using the bases recommended by the consultant.

c. How might activity-based costing result in better decisions by Pickle Motorcycles's management?