Rosie Company has two divisions, Division A and Division B. Rosie Company has been using a traditional overhead allocation technique based on direct labor hours. For the most recent year, the predetermined overhead rate was $40 per direct labor hour. All of Rosie Company's products are sold in competitive markets. An activity-based costing analysis of Rosie's operations has identified three different cost drivers. Data about the cost drivers for the most recent year is given below:

Cost Drivers

Number of events per year

Cost pool

X

1,000

$100,000

Y

500

75,000

Z

20

60,000

Total

$235,000

The following data relate to cost driver event activity within the two divisions during the most recent year:

Division A

Division B

Total

Cost Driver X events

700

300

1,000

Cost Driver Y events

100

400

500

Cost Driver Z event

12

8

20

Direct Labor Hours

5,000

1,000

6,000

Which ONE of the following statements is MOST CORRECT? If the activity-based costing system had been used in the most recent year in place of the traditional overhead allocation technique...

profit for Division A would have increased by $122,000.

profit for Division B would have been unchanged.

profit for Division A would have been unchanged.

profit for Division A would have increased by $78,000.

profit for Division B would have increased by $118,000.

profit for Division B would have increased by $78,000.

profit for Division A would have increased by $118,000.

profit for Division B would have increased by $122,000.