A firm uses activity-based costing and has the following activity rates: $100 per machine hours, $500 per batch start, $5 per order.

The firm has several products, including the following two.

Product 1: $100,000 revenue, $50,000 direct costs, 250 machine hours, 25 batch starts, 500 orders

Product 2: $95,000 revenue, $40,000 direct costs, 40 machine hours, 16 batch starts, 400 orders

Which of the following process improvements is the MOST profitable?

-Reduce machine hour activity rate cost by 25%.

-Reduce Product 1s direct costs by 12.5%.

-Reduce Product 2s orders by 50%.

-Reduce both products batch starts by 25%.