1. Compute (a) last year's CM ratio and the break-even point in balls and (b) the degree of operating leverage at last year's sales level. 2 Due to an increase in labor rates, the company estimates next year's voriable expenses will increase by 53 per bali if this change takes place and the seling price per ball remoins constant at $25. What wil be next year's CM ratio and the break-even point in balls? 3. Refer to the data in requirement 2 . If the expected change in voriable expenses takes place, how many balls wiu have to be sold next year to earn the same net operabng income, $101,000, as last year? 4. Refer again to the dota in requirement 2 The president feets that the compony must raise the seiling price of its basketbails if Northwood Company wants to maintoin the some CM ratio as last year (as computed in fequirement la), what seling price per bail must it charge next year to cover the increased labor costs? 5. Refer to the original dato. The company is discussing the construction of a new, automated manufacturing plant The new plant would slash varlable expenses per bali by 40.00%, but it would cause fixed expenses per year to double If the new plant is bult. What would be the company's new CM ratio and new break-even point in balis? 6 Refer to the data in requirement 5 a. If the new plant is bullt how many balls will have to be sold next year to earn the same net operating income, 510t,000. as iast. year? b. Assume the new plant is buit and that next year the compary manufactures and selis 32,500 balls (the same number as sold last year). Piepare a contribution format income statement and compute the degree of operating leverage 1. Compute (a) last year's CM ratio and the break-even point in balls and (b) the degree of operating leverage at last year's sales level. 2 Due to an increase in labor rates, the company estimates next year's voriable expenses will increase by 53 per bali if this change takes place and the seling price per ball remoins constant at $25. What wil be next year's CM ratio and the break-even point in balls? 3. Refer to the data in requirement 2 . If the expected change in voriable expenses takes place, how many balls wiu have to be sold next year to earn the same net operabng income, $101,000, as last year? 4. Refer again to the dota in requirement 2 The president feets that the compony must raise the seiling price of its basketbails if Northwood Company wants to maintoin the some CM ratio as last year (as computed in fequirement la), what seling price per bail must it charge next year to cover the increased labor costs? 5. Refer to the original dato. The company is discussing the construction of a new, automated manufacturing plant The new plant would slash varlable expenses per bali by 40.00%, but it would cause fixed expenses per year to double If the new plant is bult. What would be the company's new CM ratio and new break-even point in balis? 6 Refer to the data in requirement 5 a. If the new plant is bullt how many balls will have to be sold next year to earn the same net operating income, 510t,000. as iast. year? b. Assume the new plant is buit and that next year the compary manufactures and selis 32,500 balls (the same number as sold last year). Piepare a contribution format income statement and compute the degree of operating leverage
