As the world reports on inflation, companies are taking steps to adjust their prices and manage their resources. Citizens are worried that prices will increase to a level that is difficult. Attentive Corporation is a private corporation formed since 2000 for the purpose of selling products to local and regional economies. The government has consulted with Atten'tive for assistance with providing cheaper product options. As at January 2005, they switched to Activity Based Costing System and has been using it ever since. Due to the switch in costing methods, Atten'tive Company used multiple cost drivers, which has a direct cause/effect relationship in its applied overhead costs. This method allows for a better accounting of costs, which may invariably have transferred out and therefore reduce some manufacturing costs. The Chief Operating Officer held a meeting with all Department Heads on their operational budgets and to present a cash flow position of the company among other schedules. All management personnel have to prepare reports and schedules, based on their department and operational functions. The objective is to determine operational deficiencies and how they can reduce cost to meet customers' budget, while making a profit. An analysis of the reports will be circulated at the end of the month. The following data was reported in an interim memo: Atten'tive Corporation provided their expected annual manufacturing budget for 2022 - 120,000 Direct Labour Hours. Their payments budget projections show that for April $300,000, May $500,000 and June $200,000. Client Collections - April: $312,500, May: $371,000 and June: $890,000. The company has a desired ROI of 40% and it has invested $3,000,000 in assets. They are being conservative on their spending therefore Attentive Company has a policy to maintain a cash budget balance of $100,000. Any financing received from First Regional Bank is at an interest rate of 11%. During the year, Atten'tive Company sold 696,000 units at an average selling price of per unit $4.20 per unit.(a) Atten'tive consulted with the Production Manager on cost variations and request a detail report on key areas of concern. The Production Manager provided the following for your assessment. Direct Materials: The per-unit standards are 2 pounds at $5 per pound. Last month, 11,200 pounds of direct materials that actually cost $53,200 were used to produce 6,000 units of product. Direct Labour: The per-unit standards are 0.5 direct labor hours at $15 per hour. In producing 6,000 units, the actual direct labor cost was $46,500 for 3,000 direct labor hours worked. Required: a. Compute the Materials Price Variance (2 Marks) b. Compute the Materials Quantity Variance (2 Marks) c. Compute the Labour Rate Variance (2 Marks d. Compute the Labour Quantity Variance (2 Marks) (b) The Chief Operating Officer reviewed the variances calculated above and requests an explanation on how standards are set. (2 Marks) Question 3 Part B (10 Marks) The variable expenses were $1,900,080, and the fixed expenses were $683,256. (a) What is the product's contribution margin ratio? (Round to nearest whole percentage) (b) What is the company's break-even point in units and in dollars for this product? (c) What is the margin of safety, both in dollars and as a ratio? (Round to nearest whole percentage) (d) If management wanted to increase its income from this product by 10%, how many additional units would have to be sold to reach this income level