Question 2 The Dairy Division of BMC, located in the city of Colac, operates at capacity, and considers applying ABC analysis to three product lines within its division: full cream milk, skim milk, and almond milk. The manager of this division identifies four activities, and their activity cost allocation rates as follows: Ordering $100 per purchase order Machine set up $75 per set up Freezing $5 per hour Packaging $0.15 per item sold The revenues, cost of goods sold, and activity usage of the three product lines are as follows: Table 2 - Dairy Division, year 2021 Year 2021 Full Cream Skim Almond Financial data Revenues $250,000 $150,000 $75,000 Direct manufacturing cost $40,000 $25,000 $15,000 Manufacturing overhead allocated ? ? ? Activity-area usage (cost-allocation base) Ordering (purchase orders) 200 100 60 Machine set up (setups) 90 35 Freezing (hours) 190 Packaging (items sold) 100,000 60,000 8,000 30 180 40 Using a division-wide allocation rate, the Dairy Division of BMC allocated manufacturing overhead to the three products at the rate of 30% of direct manufacturing cost. Required a) Using the division-wide allocation rate, calculate and identify which product line has the highest gross margin in dollars and in percentage (i.e., gross profit/revenue). (Chapter 11, 3 marks) b) Using ABC, calculate and determine the profitability (i.e., gross profit/revenue) of the three product lines (i.e., specify the highest, the middle, and the lowest profitable product line). (Chapter 11, 6 marks)