25 Dom 1 Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labour workers. Thus, variable expenses are high, totalling $15 per ball, of which 60% is direct labour cost Last year, the company sold 30,000 of these balls, with the following results Sales (10,000 balls) Variable expenses Contribution margin Fixed expenses Operating Income $750,000 450,000 300,000 210,000 $90,000 Check my w 25 peint References 4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement fa), what selling price per ball must it charge next year to cover the increased labour costs? Selling price 5. Refer to the original data. The company is discussing the construction of a new automated manufacturing plant. The new plant would slash variable expenses per ball by 40%, but it would cause food expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break even point in bas 25 Dom ebook References 6. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold next year to ear the same operating income, $90,000, as last year? Number of balls b-1. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as sold last year). Prepare a contribution format income statement Northwood Company Contribution Income Statement Meck my wo 25 Don 1 0 b-2. Compute the degree of operating leverage Degree of parating leverage Help Save & Exit Check Saved cation.com/ext/map/index.html?.con-con&inxternal browser-08launchUrt-https%253A% x + 52Fnewconnect.mheducation.com%252F/ Help Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in small plant that relies heavily on direct labour workers. Thus, variable expenses are high, totalling $15 per ball, of which 60% is dir labour cost Last year, the company sold 30,000 of these balls, with the following results: Sales (30,000 balls) Variable expenses Contribution margin Fixed expenses Operating Income Required: $750,000 300,000 210,000 $90,000 1-a. Compute last year's CM ratio and the break-even point in balls CMR 2 21,000 bas 63 $ 64 4 Prev Next >> Links C Mostly cloudy O 55 % C hp 6 CO B 17 &7 CD ca 3 B 8 E 69 E R D 10 19 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 ba must it charge next year to cover the increased labour costs? Selling price 5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls? CM Ratio Unit sales to break even balls 6. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold next year to earn the same operating income, $90,000. Number of balls b-1. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number year). Prepare a contribution format income statement Northwood Company Contribution Income Statement 0 Prev of 4 b-2. Compute the degree of operating leverage. Degree of operating leverage