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 $400,000 20 batches 60 batches

Product line manufacturing overhead $600,000 10 lines 40 lines

What is Dakota Company's gross margin for Product 1 using activity based costing?

What is Dakota Company's gross margin for Product 1 using activity-based costing?

• $370,000
• $450,000
• $400,000
• $380,000