Al's Pancake World manufactures pancakes in three sequential departments: Mixing, Frying, and Packaging. Al uses two categories of direct materials in the Mixing department to make each tub of liquid pancake mix: dry ingredients (flour, sugar, baking soda, salt) and wet ingredients (milk, eggs, and oil). No direct materials are added in the Frying department. Only to-go containers are added in the Packaging department. In the Mixing department, the dry ingredients, which account for 60% of the direct materials, are added immediately at the beginning of the production process and the wet ingredients are added when the conversion process is 55% complete. Conversion costs are incurred uniformly throughout production in the Mixing department. Management estimates that 70% more in conversion costs need to be added to the tubs of mix in the Mixing department before they can be transferred to the Frying department.

The Mixing department began August with 200 tubs of pancake mix in process and started another 2,000 tubs during the month. At month end, 1,950 tubs remained in process in the department and were assigned a cost of $6,435 on the department's August production cost report, $2,340 of which was for conversion costs. Costs in beginning work in process were $7,322 in total, of which $4,260 was related to direct material and $3,062 was related to conversion.

Al's Pancake World is considering selling liquid pancake mix in addition to fully cooked pancakes. If one tub of the liquid pancake mix was sold immediately after the Mixing department for $16, what is the gross profit recognized on one tub of mix? Round all calculations to two decimal places and final answer to two decimal places

a.$4.00

b.$7.50

c.$8.50

d.$3.78

e.$3.50