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Company manufactures basketbals. The company has a ball that sels for $25. At present, the ball is manufactured in a small plant that relies heavily

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Company manufactures basketbals. The company has a ball that sels for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaang S 15 00 per ball, of which 60% is direct labor cost Last year, the company sold 56,000 of these balls, with the following results: Sales (56,099 balls) Contribution margin Fixed expenses Net operating income 848.e0e 560,000 373.000 187,eee 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 years 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-evern point in balls? 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will h@ve to be sold next year to earn the same net operating income, $187,000, 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 basketbals. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement la), 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%, butit 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 built, how many balls will have to be sold next year to earn the same net operating income, $187000, as lest year? b. Assume the new plant is built and that next year the company manufactures and sells 56,000 balls (the same year). Prepare a contribution format income statement and compute the degree of operating leverage number as sold last

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