Reference no: EM132509420
Solar Salt Company has two divisions. Sales, direct materials cost, and direct labor cost data for Solar Salt's two divisions are not available. However, manufacturing overhead and gross profit data for the two divisions are available, as follows.
Agricultural Retail
Products Products
Manufacturing overhead $450,000 $250,000
Gross profit 150,000 100,000
- Manufacturing overhead is allocated to production based on the amount of direct labor cost.
- Solar Salt has determined that its total manufacturing overhead cost of $700,000 is a mixture of unit-level costs, batch-level costs, and product line costs. Solar Salt has assembled the following information concerning the manufacturing overhead costs, the annual number of units produced, production batches, and number of product lines in each division.
Total
Manufacturing
Overhead Agricultural Retail
Costs Products Products
Unit-level overhead $210,000 7,500 units 13,500 units
Batch-level overhead 280,000 50 batches 90 batches
Product line overhead 210,000 10 lines 18 lines
$700,000
Question 1: How much will GROSS PROFIT in each of the divisions be if Solar Salt adopts an activity-based costing system?
Agricultural, $350,000; Retail, $100,000
Agricultural, $50,000; Retail, $200,000
Agricultural, $350,000; Retail, loss of $100,000
Agricultural, loss of $50,000; Retail, $300,000
Agricultural, $150,000; Retail, $100,000
Agricultural, $350,000; Retail, $300,000
Agricultural, loss of $50,000; Retail, loss of $100,000
Agricultural, $250,000; Retail, $450,000