x.Hmze=\"3\" face=\"Times New Roman\"> 9-35. Choosing an Activity-Based Costing
ID: 2433756 • Letter: X
Question
x.Hmze="3" face="Times New Roman">9-35. Choosing an Activity-Based Costing SystemPickle 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 signi?cantly 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 1,000 Route 66s, 4,000 Main Streets, and 10,000 Alley Cats and had the
following 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. . . . . . . . . . . 520,000
Order processing. . . . . . . . . 1,280,000
Warehousing costs. . . . . . . . 1,860,000
Energy to run machines. . . . 840,000
Shipping. . . . . . . . . . . . . . . . 720,000
__________
Contribution margin. . . . . . . . . $9,432,000
Fixed overhead
Plant administration. . . . . . . 1,760,000
Other fixed overhead. . . . . . 2,800,000
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Explanation / Answer
x.Xlign="center">PICKLE MOTORCYCLES,INC. Income Statement _________________________________________________________________________
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