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, 2,100 Main Streets, and 4,800 Alley Cats and had the following revenues and expenses. PICKLE MOTORCYCLES, INC. Income Statement Route 66 Main Street $7,600,000 $ 11,000,000 Alley Cat $9,800,000 Total $ 28,400,000 3,300,000 279,000 5,100,000 486,000 3,600,000 1,050,000 12,000,000 1,815,000 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 500,000 1,260,000 1,794,500 850,000 592,000 $ 9,588,500 1,780,000 2,810,000 $ 4,998,500 PMI's chief financial officer (CFO) hired a consultant to recommend cost allocation bases. The consultant recommended the following. Activity Level Main Street 35 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 25 500 150 12,000 1,000 600 190 14,000 3,800 Alley Cat 40 700 400 24,000 10,000 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? 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 $ 11,000,000 Alley Cat 9,800,000 Total 28,400,000 $ $ Sales revenue Direct costs: Direct material 3,300,000 279,000 5,100,000 486,000 3,600,000 1,050,000 12,000,000 1,815,000 $ 4,021,000 $ 5,414,000 $ 5,150,000 $ 14,585,000 Direct labor Variable overhead Contribution margin Fixed overhead: Plant administration Other fixed overhead Gross profit 1,780,000 2,810,000 4,998,500