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 665, 2100 Main Streets, and 5,000 Alley Cats and had the following revenues and expenses. PICKLE MOTORCYCLES, INC Income Statement Route 66 Main Street Alley Cat Total Sales revenue 57,800,000 $11,200.000 $ 9.500,000 $ 28,600,000 Direct costs Direct materials 3,500,000 4,300,000 3,900,000 11,700,000 Direct labor 278,000 456.000 1,100,000 1.364.000 Variable overhend Machine setup 475.000 Order processing 1,050,00 Warehousing costs 1.947.500 Energy to run machines 918.000 Shipping 810.000 Contribution margin 59,035,500 Fixed overhead plant administration 1,690,000 2.270,000 other fixed overhead $ 5,375.500 Gross profit 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 Hachine-hours Number of units shipped Route 66 20 400 230 10,000 1,000 Activity Level Main Street 30 500 180 18,000 4,200 Alley cat 45 600 410 26,000 11,000 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 Yor Pickle Motorcycles (See the sing 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 the consultant c. How might activity based costing result in better decisions by Pickle Motorcycles's management Complete this action hentarinn vour answers in the tabs holaw 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. Thput all amounts as positive values.) PICKLE MOTORCYCLES Income Statement Route 66 Main Street 7.800.000 S 11,200,000 $ Alley Cat 9,600,000 $ Total 28.600,000 S 3,500 000 278,000 4300 000 486 000 3.900.000 1.100.000 11.700.000 1864 000 Sales revenue Direct costs Direct material Direct labor Variable overhead Contribution margin Fixed overhead Plant administration Other foxed overhead Gross pro $ 4,022,000 $ 6.414 000 $ 4.500.000 15036.000 1.590.000 2.770.000 5375 500 Required B PICKLE MOTORCYCLES Income Statement Route 66 Main Street Back Alley Total $ 7,800,000 $ 11,200,000 $ 9,600,000 $ 28,600,000 3,500,000 278,000 4,300,000 486,000 3,900,000 1,100,000 11,700,000 1,864,000 Sales revenue Direct costs: Direct material Direct labor Variable overhead Machine setup Order processing Warehousing costs Energy to run machines Shipping Contribution margin Fixed overhead Plant administration Other foxed overhead Gross profit 475,000 1,050,000 1,947,500 918,000 810,000 1.690,000 2.770,000 $ 5,375,500