Question 10

Northern Star sells several products. Information of average revenue and costs is as follows:

Selling price per unit $20.00

Variable costs per unit:

Direct material $4.00

Direct manufacturing labor $1.60

Manufacturing overhead $0.40

Selling costs $2.00

Annual fixed costs $96,000

The company sells 12,000 units at the end of the year.If direct labor and direct material costs increase by $1 each, contribution margin ________.

		increases by $20,000
		increases by $14,000
		decreases by $24,000
		decreases by $14,000