am B-5 Problems Nothwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball Ils manufactured In a small plant that reltes heavity on direct labor workers. Thus, vartable 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 Sales (36,8a0 bal1s) Varlable expenses Contribut Ion eargin Fixed expenses Net operating incoee $ 9e3,680 548,880 66.600 263,33 97,600 Required 1 Compute (a) last years CM rato 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 estumates that next yoars varlable expenses will increase by $3.00 per ball. It this change takes place and the selling price per bal remalns constant at $2500, what will be next year's CM ratio and the br point in balls? 3. Refer to tho data In (2) above. If the expected change in varlable axpenses takes place, how many balls will have to be sold next year to earn the same net operating Income. $97,000, as last year? stant at $25.00, what il be next year's CM ratio and the Rafer again to the data In (2) above. The president feels that the company must ralse the selling price of ns basketballs. If Company wants to maintain the same CM ratio as last year (as computed in requirement 1a). what selling pnce per ball mact in charge next year to cover the Increased labor costs? Reter to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant wo slash variable expense per ball by 40 % but it would cause foed expenses per year to double. lf the new plant IS bul what would be the company's new CM rato and new break-even point in balls? 6. Refer to the data in (5) above. a f the hew plant is buit. how many balls wil have to be sold next year to earn the same net operating Income, $97000, as last year? b. Assume the new plant is bult and that next year the company manufactures and sells 36,000 balls (the same number as sold last yean. Prepere a contribution format income statement and compute the degree of operating leverage Complete this question by entering your answers in the tabs below Rea i leq 2 Req 3 Req 4 Req 5 Req 6A Rq 68 Compute (o) last yers CM ratio and the break even point in balls, and (b)the degree of operating levorage at last year's sales level. (Round "it sales to break even to the nearest whole unit and ocher answers to 2 decimal CM Rato Unit sales to break even Degree of cperating leverage bals 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 taloes 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 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 Req 2 Req 3 Req 4 Req 5 Req Req 6B Req 1 Refer to the data in Required (2). Ir the expected change in variable expenses takes place, how sold next year t earn the same net operating income, $97:000, as last year? (Round your answer to the nearest whole unit. of balls Req4 Req 1 Req 2 Req 3 Req 5 Req 6A Req 6B Refer again to the data in Required (2). The president feels that the company must raise the selling price of its basketballs. I 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 incressed labor costs? (Round your answer to 2 decimal places.) K Reg 3 Keq Req 6A Req 6B 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.) Show lessA CM Ratio Unit sales to break even balls Req4 Req GA > Req 6B If the new plarit is built, 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.) of Req5 Req 6B> Assurne the new plant is built and that next year the company manufactures and sells 36,000 balls (the sarme number as sold last year). Prepare a contribution format income statement and compute the degree of o is bult and thar renz ver the company manfectures and ells operating leverage to 2 decimal places.) Northwood Company Contribution Income Statement of operating leverage C Req GA Toxaway Compary ts a merchandiser that segments its business Into two divislons-Commercial and Residentlal. The company's accounting intern was asked to prepare segmented Income statements that the company's divisilonal managers could use to calculate ther broak-even points and make decislons. She took the prior month's companywide Income statement and prepared the absorption format segmented income statement shown below Tetal ConpanyCompercial Residentlal Sales Cest ef goods seld Gross argin Selling and administrative expenses Net operating incone 835,8295 599,000 418.909 72, 0 32,78 153,40 141. S 30,7 19,6e0 17,180 In preparing these statements. the Intern determined that Toca way's ony variable teling and administrat o opene s a 10% sales commiszion on all sales. The company's total fiood expenses include $73.500 of common fxed expenses that would continue to be Incurred even If the Commercsal or Residental segments are discontnued. $68.000 of fixed expenses that would be avolded if the Commertctal segment is dropped, and $46,000 of fixed expenses that would be avoided if the Residential segment is dropped Requtred Do you agree with the intern's decision to use an absorpson format for her segmented income statemen? Based on a review of the Intern's segmented income statemant a. How much of the company's common fixed expenses and she dllocate to the Commercial and Residentsal segmenns? b. Which Recidenzial segments laj sales, (b) cost of goods sold, or ic) gross margin? 3. Do you agree with the intern's decision to allocate the common fixed expenses to the Commercial and Residental segments? 4. Redq the intern's segmented income catement using the contribution format 5. Compune the companywde break-even point in dolar sales 6. Compte the break-even point in dollar cales for the Commercial DMsion and for the Residenial Division 7 Asaume the company decided to pay ts sales representatives in the Commercial and Residental Divisions a total monthly salary af 20 an $40 00 respo vely andt erns companyifde sales com mission percentage from ,0% to 5% Calculate the new break-even polnt In dollar sales for the Commercial DMision and the Residensal Division of the following three allocation bases did she most Iikely used to alocate common foed expenses to the Commercial and Complete this question by entering your answers in the tabs below. Req 20 Req 3 Req 4 Req 5 Req 6 Reg 7 D you sgrue vith the nden's decision to use an absorption formut for her segmented income statementa Complete this question by entering your answers in the tabs below. Req i 2A Req 2B Req 3 Req 4 Req 5 Req 6 Req 7 Based on a review of the inten's segmented income statement, how much of the company's common fixed expenses did she allocate to the Commercial and Residential segments? Commercial Residential Common fied expenses 5. Compute the companywide break-even point In dollar sales 6. Compute the break-even point in dollar sales for the Commercial DMsion and for the Residential 7 Assume the company decided to pay ts sales representatives in the Commercial and Residential DMsions a total $20.000 and $40,000. ely, and to lower itscompanywide sales commission percentage from 10% to 5% Calculate the new res -even point in dollar sales for the Commercial DvIslon and the Residental Division. Complete this question by entering your answers in the tabs below Req 2A Reg 28 Req 4 Req 5 Req 6 Req 7 Req 1 Req 3 nted income statement, which of the following three allocation bases did she most likely used to allocate common fixed expenses to theC Cost of goods sold OGross margin K Req 2A Req3> K Prev 3 ar5 Next> ave decided to extend the su Req 6 Req 7 Do you agree vath the intern's decision to allocate the common fixed expenses to the Commercial and Residential segments? OYes Redo the intern's segmented income statement using the contribution format. Toxaway Company Income Staterment Total Company Commercial Residential Variable expenses: Total variable expenses Req3