Answer the Following Questions Using the Information Below:
Northern Star

question 34

Multiple Choice

Answer the following questions using the information below:
Northern Star sells several products. Information of average revenue and costs is as follows:
$$\begin{array} { l r } \text { Selling price per unit } & \$ 20.00 \\\text { Variable costs per unit: } & \\\text { Direct material } & \$ 4.00 \\\text { Direct manufacturing labor } & \$ 1.60 \\\text { Manufacturing overhead } & \$ 0.40 \\\text { Selling costs } & \$ 2.00 \\\text { Annual fixed costs } & \$ 96,000\end{array}$$
$\text { The company sells } 12,000 \text { units at the end of the year. }$
-If direct labor and direct material costs increase by $1 each,contribution margin ________.

• A) increases by $20,000
• B) increases by $14,000
• C) decreases by $24,000
• D) decreases by $14,000