Use the Information Below to Answer the Following Questions The Demand for All Service Is Unlimited

question 50

Multiple Choice

Use the information below to answer the following questions.
Computers Expertise Ltd provides three services, the details for which are as follows: $\begin{array}{llll}& \underline{\text { Basic} }& \underline{ \text { Secretarial }} & \underline{ \text { Expert }}\\ \text { Sales price per unit } & \$ 20 & \$ 30 & \$ 50 \\\text { Variable cost per unit } & \$ 10 & \$ 12 & \$ 15 \\\text { (paper, transport, etc.) } & & & \\\text { Labour time per unit } & 1 \text { hour } & 2 \text { hours } & 5 \text { hours } \\\text { Annual fixed costs } & \$ 20,000 & &\end{array}$
The demand for all service is unlimited. The ability to provide the service is limited by the availability of qualified staff and therefore the labour time available.
-Refer to the table above. Which product is the most profitable?

• A)Expert, because it has the highest contribution margin.
• B)Expert, because it has the highest sales price.
• C)Secretarial, because it is the most pleasurable for staff.
• D)Basic, because it provides the highest dollar contribution per labour hour.

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Definitions:

Net Operating Income

The profit generated from a company's everyday business operations, indicating the company's ability to generate income through sales after covering operating expenses.

Total Common Corporate Costs

Overhead or administrative expenses shared across the various divisions or departments of a company.

Fixed Manufacturing Overhead

The set costs associated with operating a manufacturing facility that do not vary with the level of production, such as rent, insurance, and salaries of permanent staff.

Direct Labor

The cost associated with the work of employees who are directly involved in the production of goods or services.