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, 2.200 Main Streets, and 4,900 Alley Cats and had the following revenues and expenses: PICKLE MOTORCYCLES, INC. Income Statement Route 66 Main Street Alley Cat Total Sales revenue $ 7.500.000 $ 11,700,000 S 9,600,000 $ 28,800,000 Direct costs Direct materials 3.400,000 4.800,000 4,000,000 12,200,000 Direct labor 284,000 489,000 1,090,000 1.863,000 Variable overhead Machine setup 500,000 Order processing 1,120,000 Warehousing costs 1,860,000 Energy to run machines 750,000 Shipping 548,000 Contribution margin S 9,959,000 Fixed overhead Plant administration 1,760,000 Other fixed overhead 2.710,000 Gross profit S 5,489,000 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 25 300 240 12.000 900 Activity Level Main Street 30 500 190 16,000 3,800 Alley Cat 45 600 370 22.000 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. (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 Alley Cat Total $ 7,500,000 $ 11,700,000 $ 9,600,000 $ 28,800,000 Sales revenue Direct costs: Direct material 4,800,000 3,400,000 284,000 4,000,000 1,090,000 12,200,000 1,863,000 Direct labor 489,000 Variable overhead Contribution margin $ 3,816,000 $ 6,411,000 $ 4,510,000 $ 14,737,000 Fixed overhead: Plant administration Other fixed overhead 1,760,000 2,710,000 $ 5,489,000 Gross profit b. Complete the income statement using the bases recommended by the consultant. (Do not round intermediate calculations.) PICKLE MOTORCYCLES Income Statement Route 66 Main Street $ 7,500,000 $ 11,700,000 Total Back Alley $ 9,600,000 Sales revenue $ 28,800,000 Direct costs: Direct material 12,200,000 3,400,000 284,000 4,800,000 489,000 4,000,000 1,090,000 1,863,000 500,000 Direct labor Variable overhead: Machine setup Order processing Warehousing costs Energy to run machines Shipping Contribution margin Fixed overhead: 1,120,000 1,860,000 750,000 548,000 Plant administration 1,760,000 2,710,000 Other fixed overhead Gross profit $ 5,489,000 c. How might activity-based costing result in better decisions by Pickle Motorcycles's management? O The activity-based costing method provides a more detailed breakdown of the costs. The activity-based costing method provides a consolidated summary of the costs