The following information was made available concerning the four departments of the Snake-Bite Company.

A B C D

Sales (in $) 100,000 25,000 50,000 75,000

Variable cost of gods sold 70,000 15,000 30,000 50,000

Variable selling expenses 10,000 2,000 6,000 12,000

Contribution margin 20,000 8,000 14,000 13,000

Fixed costs 20,000 5,000 10,000 15,000

Profit 0 3,000 4,000 (2,000)

The president of the company has decided that one department must be dropped. Fixed costs have been assigned according to the sales of each department. Regardless of your decision, fixed costs will be reduced by 25%. Which department should be dropped so as to give the greatest benefit to the company?

Select one:

a. C

b. B

c. D

d. A

Question 4

A business plans to make 15,000 coats per annum, each taking the 1.5 direct labour hours. If the direct labour rate is $8 per hour and a pay rise of 15% is awarded halfway through the year, what is the total annual direct labour budget?

Select one:

a. $ 120,000

b. $ 207,000

c. $ 180,000

d. $ 193,500