3. Check my work Problem 6-20 CVP Applications: Break-Even Analysis: Cost Structure: Target Sales (LO6-1, LO6-3, LO6 4. LO6-5, L06-6, LO6-8] 20 Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high totaling $15.00 per ball of which 60% is direct labor cost Last year, the company sold 36,000 of these balls, with the following results: Sco Dein Sales (36,000 balls) Variable expenses Contribution in Fixed expenses Net operating income $ 900.000 540.000 360,000 263.000 $ 97.000 Required: 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 that next year's 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 year's CM ratio and the break-even point in balis 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balis will have to be sold next year to earn the same net operating income, $97.000, 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 basketbalis. It Northwood Company wants to maintain the same CM ratio as last year (as computed in requirements, what selling price per ball Required: 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 levet 2. Due to an increase in labor rates, the company estimates that next year's 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 year's CM ratio and the break-even 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $97000, 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 to), what selling price per ball 5. Refer to the original data. The company is discussing the construction of a new, outomated 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 company's new CM ratio and new break-even point in balls? 6. Refer to the data in (5) above. a. If the new plant is bullt, how many balls will have to be sold next year to earn the same net operating income, $97.000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 36,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. 1 - 1 Req1 Req2 Req3 Req 4 Req5 Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degr sales to break even" to the nearest whole unit and other answers to 2 decimal plac CM Ratio % Unit sales to break even balls Degree of operating leverage Req1 Req 2 Req3 Req 4 ue to an increase in labor rates, the company estimates that next y lace and the selling price per ball remains constant at $25.00, what atio to 2 decimal places and "Unit sales to break even" to the neare M Ratio % nit sales to break even balls Complete this question by entering your answers in the tabs below. Reg 1 Req2 Req3 Reg 4 Req5 Reg 6 Req6B Refer to the data in Required (2). If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $97,000, as last year? (Round your answer to the nearest whole unit) Number of balls took Rea 1 Req2 Reg 3 Reg4 Reg 5 Reg 6 Reg 68 Print References Refer again to the data in Required (2). 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 (os computed in requirement 1a) what selling price per ball must it charge next year to cover the increased labor costs? (Round your answer to 2 decimal places) Selling price Req1 Reg 2 Req3 Reg 4 Reg 5 Reg 6A Reg 68 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 40.00%, 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? (Round "CM Ratio to 2 decimal places and Unit sales to break even to the nearest whole unit.) CM Ratio Unit sales to break even balls Regt Reg 2 Reg Reg4 Reg 5 lug Regon if the new plant is built how many balls will have to be sold next year to earn the same net operating income, 197,000 as last year? (Round your answer to the nearest whole unit.) Number of Complete this question by entering your answers in the tabs below. Reg1 Req2 Reg 3 Reg 4 Reqs Req6A Req6B Assume the new plant is built and that next year the company manufactures and sells 36,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage (Round "Degree of operating leverage to 2 decimal places.) Northwood Company Contribution Income Statement 0 0 Degree of operating leverage