Required information

[The following information applies to the questions displayed below.]

Mason Corporation began operations at the beginning of the current year. One of the companys products, a refrigeration element, sells for $195 per unit. Information related to the current years activities follows.

Variable costs per unit:

Direct material- $15

Direct labor - 35

Manufacturing overhead- 46

Annual fixed costs:

Manufacturing overhead- $600,000

Selling and administrative- 860,000

Production and sales activity:

Production (units)- 24,000

Sales (units)- 20,000

Mason carries its finished goods inventory at the average unit cost of production and is subject to a 30 percent income tax rate. There was no work in process at year-end.

3. If next years production decreases to 23,000 units and general cost behavior patterns do not change, what is the likely effect on:

a. The direct-labor cost of $35 per unit?

1. No change
2. Increase
3. Decrease

b. The fixed manufacturing overhead cost of $600,000?

1. No change
2. Increase
3. Decrease

c. The fixed selling and administrative cost of $860,000?

1. No change
2. Increase
3. Decrease

d. The average unit cost of production?

1. No change
2. Increase
3. Decrease