1. Solar Salt Company has two divisions. Sales, direct materials cost, and direct labor cost data for Solar Salts two divisions are not available. However, manufacturing overhead and gross profit data for the two divisions are available, as follows.

Agricultural Retail

Products Products

Manufacturing overhead* $450,000 $250,000

Gross profit 150,000 100,000

*Manufacturing overhead is allocated to production based on the amount of direct labor cost.

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.

Total

Manufacturing

Overhead Agricultural Retail

Costs Products Products

Unit-level overhead $210,000 7,500 units 13,500 units

Batch-level overhead 280,000 50 batches 90 batches

Product line overhead 210,000 4 lines 24 lines

$700,000

How much will GROSS PROFIT in each of the divisions be if Solar Salt adopts an activity-based costing system?

a. Agricultural, loss of $50,000; Retail, $300,000

b. Agricultural, $250,000; Retail, $450,000

c. Agricultural, loss of $50,000; Retail, loss of $100,000

d. Agricultural, $350,000; Retail, loss of $100,000

e. Agricultural, $50,000; Retail, $200,000

f. Agricultural, $395,000; Retail, loss of $145,000

g. Agricultural, $350,000; Retail, $100,000

h. Agricultural, $150,000; Retail, $100,000