1.

Whirly corporations contribution format income statement for the most recent month is shown below:

Total Per unit

Sales (8,200 units ) $246,000 $30.00

Variable expenses. 155,800. 19.00

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Contribution margin 90,200. $11.00

Fixed expenses 54,000

Net operating income $36,200

Required:

1. What would be the revised net operating income per montg if the sales volume increases by 70 units ?

2. What would be the revised net operatong income per month if the sales volume decreases by 70 units ?

3. What would be the revised net operating income per month if the sales volume is 7,200 units ?

2.

Lin corporation has a single produxt whosw selling price is $140 per unit and whose variable expenses is $70 per unit. The companys monthly fixed expense is $32,250.

Required :

1. Calculate the unit sales needed to attain a target profit of $8,000.

2. Calculate the dollar sales needed to attain a target profit of $8,700

3.

Northwood company manufactures basketballs. The company has a ball that sells for $25. At present , the ball is manufactured in a small plant that eelies heavily on direct labor workers. Thus, variable expenses are high , totaling $15.00 per ball, of which 60% is direct labor cost.

Sales (58,000 balls) $1,450,000

Variable expenses 870,000

Contribution margin 580,000

Fixed expenses 374,000

Net operaring income $206,000

Required:

1. Compute (a) last years CM ratio and the break-even point in balls , and (b) the degree of operating leverage at last years sales level.

2. Due to an increase in labor rates, the company estimates that next years variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next years CM ratio and the break-even point in balls?

3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have been sold next year to earn the same net operaring income, $206,000, as last year?

4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If northwood company wants to maintain the same CM ratio As last year ( as computed in requirement 1a), what selling price per ball must it charge next year to cover the increased labor costs?

5. Refer to the original data. The company is discussing the constru of a mew , automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00% , but it would cause fixed expenses per year to double. If the new plant is built, what would be the companys new CM ratio and new break- even point in balls?

6. Refer to the data above

a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $206,000, as last year?

b. Assume the new plant is built and that the next year the company manufactures and sells 58,000 balls ( the same number as sold last year). Prepare a contribution format income statement and compute the degree of operaring leverage.