490,000 310,000 Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relles 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 48,000 of these bolls, with the following results: Salon (40,000 ball $1,200.000 Variable expenses 220.000 Contribution margin xed expenses Not operating income 161,000 Required: 1. Compute () last year's CM ratio and the break-even point in bolls, 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 vallible expenses will increase by $3.00 per ball in this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM rotlo and the break oven point in bolls? 3. Refer to the data in (2) above. If the expected change in variable expenses tokes place, how many balls will have to be sold next year to earn the same net operating Income, $161,000, 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 basketbols ir Northwood Company wants to maintain the same CM ratio on last year (os computed in requirement to), 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 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? 6. Refer to the data in (5) above . If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $161,000, as inst year? b. Assume the new plant is built and that next year the company manufactures and sells 48,000 bolls (the same number as sold tot b. Assume the new plant is built and that next year the company manufactures and sells 48,000 balls the same number as soldest year). Prepare a contribution format Income statement and compute the degree of operating leverage Complete this question by entering your newers in the tabs below. Hea heq Deg4 Rens RAGA 6 Compute(s) fast year's CM ratio and the break-even point in balls, and (b) the degree of operating severage at last year's Unul anton to break ovan Degree of pering