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 1,000 Route 66s, 2,100 Main Streets, and 5,300 Alley Cats and had the following revenues and expenses. PICKLE MOTORCYCLES, INC. Income Statement Route 66 Main Street $ 8,000,000 $ 11,500,000 Alley Cat $ 9,400,000 Total $ 28,900,000 2,900,000 295,000 4,900,000 473,000 4,300,000 1,050,000 12,100,000 1,818,000 Sales revenue Direct costs Direct materials Direct labor Variable overhead Machine setup Order processing Warehousing costs Energy to run machines Shipping Contribution margin Fixed overhead Plant administration Other fixed overhead Gross profit 500,000 1,440,000 1,733,750 918,000 730,000 9,660,250 $ 1,760,000 2,900.000 5,000,250 $ PMI's chief financial officer (CFO) hired a consultant to recommend cost allocation bases. The consultant recommended the following. Activity Setting up machines Processing orders Warehousing Using energy Shipping Cost Driver Number of production runs Number of sales orders received Number of units held in inventory Machine-hours Number of units shipped Route 66 20 400 150 10,000 1,200 Activity Level Main Street 35 600 160 20,000 4,400 Alley Cat 45 600 420 24,000 9,000 The consultant found no basis for allocating the plant administration and other fixed overhead costs and recommended that these not be applied to products. 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? Complete this question by entering your answers in the tabs below. Required A Required B Required C 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.) PICKLE MOTORCYCLES Income Statement Route 66 Alley Cat Total Main Street 11,500,000 Sales revenue $ 8,000,000 $ $ 9,400,000 $ 28,900,000 Direct costs: Direct material 4,300,000 2,900,000 295,000 4,900,000 473,000 12,100,000 1,818,000 1,050,000 Direct labor Variable overhead Contribution margin $ 4,805,000 $ 6,127,000 4,050,000 $ 14,982,000 Fixed overhead: Plant administration Other fixed overhead 1,760,000 2,900,000 5,000,250 Gross profit $ Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Required C Complete the income statement using the bases recommended by the consultant. (Do not round intermediate calculations. Input all amounts as positive values.) PICKLE MOTORCYCLES Income Statement Total Route 66 Main Street $ 8,000,000 $ 11,500,000 Back Alley $ 9,400,000 Sales revenue $ 28,900,000 Direct costs: Direct material 4,900,000 2,900,000 295,000 4,300,000 1,050,000 12,100,000 1,818,000 Direct labor 473,000 Variable overhead: Machine setup Order processing Warehousing costs Energy to run machines Shipping Contribution margin Fixed overhead: 500,000 1,440,000 1,733,750 918,000 730,000 Plant administration Other fixed overhead 1,760,000 2,900,000 $ 5,000,250 Gross profit Complete this question by entering your answers in the tabs below. Required A Required B Required C How might activity-based costing result in better decisions by Pickle Motorcycles's management? The activity-based costing method provides a more detailed breakdown of the costs. The activity-based costing method provides a consolidated summary of the costs.