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 900 Route 66s, 1,800 Main Streets, and 5,300 Alley Cats and had the following revenues and expenses: PICKLE MOTORCYCLES, INC. Income Statement Route 66 Main Street $ 7,700,000 $ 11,500,000 Alley Cat 9,800,000 Total 29,000,000 $ $ 3,000,000 296,000 4,700,000 477,000 3,700,000 1,120,000 11,400,000 1,893,000 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 525,000 1,200,000 1,627,500 840,000 524,000 10,990,500 $ 1,750,000 2,750,000 6,490,500 S PMI's chief financial officer (CFO) hired a consultant to recommend cost allocation bases. The consultant recommended the following: Route 66 Alley Cat 45 25 300 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 Main Street 35 500 190 18,000 4,100 160 12,000 1,000 700 350 26,000 8,000 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. (Round your variable overhead rate to 2 decimal places and your final answers to the nearest whole dollar amount.) PICKLE MOTORCYCLES Income Statement Route 66 Main Street $ 7,700,000 $ 11,500,000 Alley Cat $ 9,800,000 Total $ 29,000,000 3,000,000 296,000 4,700,000 477,000 3,700,000 1,120,000 11,400,000 1,893,000 Sales revenue Direct costs: Direct material Direct labor Variable overhead Contribution margin Fixed overhead: Plant administration Other fixed overhead Gross profit 1,750,000 2,750,000 6,490,500 $ b. Complete the income statement using the bases recommended by the consultant. (Do not round intermediate calculations.) PICKLE MOTORCYCLES Income Statement Route 66 $ 7,700,000 Main Street $ 11,500,000 Back Alley $ 9,800,000 Total $ 29,000,000 3,000,000 296,000 4,700,000 477,000 3,700,000 1,120,000 11,400,000 1,893,000 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 525,000 1,200,000 1,627,500 840,000 524,000 1,750,000 2,750,000 6,490,500 $