MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products using machine-hours. Last year, the company produced 9,000 units of M3100, 19,000 units of M4100, and 9,000 units of M6100 and had the following revenues and costs:

MTI
Income Statement
M3100 M4100 M6100 Total
Sales revenue $ 8,900,000 $ 14,000,000 $ 14,500,000 $ 37,400,000
Direct costs
Direct materials 2,700,000 4,500,000 3,100,000 10,300,000
Direct labor 590,000 890,000 1,720,000 3,200,000
Variable overhead
Setting up machines 2,400,000
Processing sales orders 1,680,000
Warehousing 2,340,000
Operating machines 1,250,000
Shipping 851,000
Contribution margin $ 15,379,000
Plant administration 6,100,000
Gross profit $ 9,279,000
MTI’s controller has heard about activity-based costing and puts together an employee team to recommend cost allocation bases. The employee team recommends the following:

Activity Cost Driver M3100 M4100 M6100
Setting up machines Production runs 9 20 21
Processing sales orders Sales orders received 170 430 200
Warehousing Units held in inventory 110 180 100
Operating machines Machine-hours 6,500 8,800 9,700
Shipping Units shipped 9,000 19,000 9,000
The employee team recommends that plant administration costs not be allocated to products.

Required:

a. Using machine-hours to allocate overhead, complete the income statement for MTI. Do not allocate plant administrative costs to products. (Do not round intermediate calculations.)

b. Complete the income statement using the activity-based costing method suggested by the employee team.