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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 re- quirements. 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, 4,000 Main Streets, and 10,000 Alley Cats and had the fol- lowing revenues and expenses:

PICKLE MOTORCYCLES, INC. Income Statement

Route 66        Main Street        Alley Cat         Total

Sales. . . . . . . . . . . . . . . . . . . .                 $7,600,000        $11,200,000         $9,500,000        $28,300,000

Direct costs

Direct materials . . . . . . . . . .        3,000,000        4,800,000        4,000,000        11,800,000

Direct labor        . . . . . . . . . . . . .                 288,000        480,000        1,080,000        1,848,000

Variable overhead

Machine setup. .                                                                        468,000

Order processing. . . . . . . . .                                                        1,152,000

Warehousing costs        . . . . . . .                                                        1,674,000

       Energy to run machines . . .                                                                756,000

Shipping        . . . . . . . . . . . . . . .                                                        648,000

Contribution margin. . . . . . . . .                                                                9,954,000

Fixed overhead

Plant administration. . . . . . .                                                        1,760,000

Other fixed overhead. . . . . .                                

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