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, 2,200 Main Streets, and 5,000 Alley Cats and had the following revenues and expenses: 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 PICKLE MOTORCYCLES, INC. Income Statement Main Street $10,900,000 Route 66 $7,100,000 3,000,000 280,000 4,800,000 482,000 Alley Cat $9,200,000 Total $27,200,000 4,100,000 1,090,000 11,900,000 1,852,000 550,000 1,280,000 1,732,500 850,000 588,000 $ 8,447,500 1,680,000 2,700,000 $ 4,067,500 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 Activity Level Route 66 Main Street, Alley Cat 25 35 40 400 600 600 170 190 410 10,000 16,000 24,000 1,000 3,700 10,000