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, 2,000 Main Streets, and 4,700 Alley Cats and had the following revenues and expenses. PICKLE MOTORCYCLES, INC. Income Statement Route 66 Main Street $7,600,000 $11,200,000 Alley Cat $9,000,000 Total $ 27,800,000 3,300,000 280,000 4,900,000 475,000 3,800,000 1,120,000 12,000,000 1,875,000 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 522,500 1,120,000 1,836,750 918,000 685,000 $ 8,842,750 1,860,000 2,720,000 $ 4,262,750 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 20 30 400 500 170 170 10,000 18,000 800 3,900 Alley Cat 45 700 450 26,000 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