The salespeople at Windsor, a notebook manufacturer, commonly pressured operations managers to keep costs down so the company could give bigger discounts to large customers. Charles, the operations supervisor, leaked the $1.25 total unit cost to salespeople, who were thrilled, since that was slightly lower than the previous year's unit cost. Budgets were not yet finalized for the upcoming year, so it was unclear what the target unit cost would be. Charles knew the current year's operating capacity was two million notebooks, and Windsor produced and sold just that many. The detailed breakdown of the $1.25 total unit cost is as follows. Direct material $0.10 Direct labor 0.20 Variable overhead 0.15 Fixed overhead 0.80 Total cost per unit $1.25