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 1.200 Route 66s. 1.900 Main Streets, and 5,300 Alley Cats and had the following revenues and expenses. PICKLE MOTORCYCLES, INC. Income Statement Route 66 Main Street $7,600,000 $10, 300,00 Alley Cat $10,000,000 Total $ 27,909, eee 3,300,000 282,690 4,580, eee 474.ee 4,200,eee 1,840, eee 12,080, eee 1,796,00 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 427,500 1,950,000 1,784, ee 850. eee 620, eee $ 9,452,5ee 1,750,000 2,800, eee $ $ 4,992,500 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 Route 66 25 400 160 10,000 800 Activity Level Main Street 30 See 160 18,888 3,700 Alley Cat 40 60e 39 22,00 11,00 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 Main Street 7,600,000 $ 10,300,000 Total Alley Cat 10,000,000 $ Sales revenue S S 27,900,000 Direct costs 4,500,000 3,300,000 282,000 4,200,000 1,040,000 12,000,000 1,796,000 474,000 s 4,018,000 $ 5,320,000 S 4,760,000 $ 14,104,000 Direct material Direct labor Variable overhead Contribution margin Fixed overhead: Plant administration Other fixed overhead Gross profit 1.750,000 2,800,000 4,902,500 S PICKLE MOTORCYCLES Income Statement Route 66 Main Street $ 7,600,000 $10,300,000 Back Alley Total $ 10,000,000 $ 27,900,000 3,300,000 282,000 4,500,000 474,000 4,200,000 1,040,000 12,000,000 1,796,000 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 fixed overhead Gross profit 427,500 1,050,000 1,704,000 850,000 620,000 1,750,000 2,800,000 $ 4,902,500