The following information is available for Dakota Company:

	Product 1	Product 2
Sales	$1,400,000	$1,800,000
Direct materials	(200,000)	(400,000)
Direct labor	(600,000)	(600,000)
Manufacturing overhead*	(500,000)	(700,000)
Gross margin	$ 100,000	$ 100,000

*allocated based on direct labor hours

Dakota Company has decided to allocate its manufacturing overhead cost using activity-based costing. It is determined that $200,000 of manufacturing overhead is for facility support costs and therefore will not be used in computing gross margin for the individual products. The remaining $1,000,000 in manufacturing overhead will be allocated based on batch-level and product line manufacturing as follows:

	Total Manufacturing Overhead Costs	Product 1	Product 2
Batch-level manufacturing overhead	$600,000	20 batches	60 batches
Product line manufacturing overhead	$400,000	10 lines	40 lines

What is Dakota Companys gross margin for Product 1 using ACTIVITY-BASED COSTING?

• $520,000
• $370,000
• $400,000
• $450,000