Allocating Unit-Level, Batch-Level, and Product Line Manufacturing Overhead Costs Solar Salt Company has two divisions. Gross margin computations for these two divisions for 2009 are as follows:

Solar Salt has determined that its total manufacturing overhead cost of $700,000 is a mixture of unit-level costs, batch-level costs, and product line costs. Solar Salt has assembled the following information concerning the manufacturing overhead costs, the annual number of units produced, production batches, and number of product lines in each division:

Required:
1. Prepare gross margin calculations for Solar Salt’s two divisions assuming that manufacturing overhead is allocated based on the number of units, number of batches, and number of product lines.
2. Comment on the comparison between the original overhead allocation done using direct labor cost and the manufacturing overhead allocation done in part (1).
3. Repeat part (1), assuming the following information concerning the number of units, batches, and product lines in each division.

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Agricultural Retail Products Products Sales Direct materials Direct labor $1,600,000 $900,000 (100,000) (50,000) (900,000) (500,000) Manufacturing overhead* Gross margin (450,000) (250,000) $ 150,000 $ 100,000 *Manufacturing overhead is allocated to production based on the amount of direct labor cost.