Contribution Margin (CM) Exercise Up to 5 pts on Exam #2 - Must Show Work Due at beginning of class on 10/18/2022 Northwood Company manufactures basketballs. Currently, the basketball is manufactured in a small plant that relies heavily on direct labor workers thus, variable expenses are high. Last year, the company sold 30,000 of these basketballs, with the following results: Required: 1. Compute last year's CM ratio and the break-even point in number of basketballs. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.50 per basketball. If this change takes place and the selling price per basketball remains constant, what will be next year's CM ratio and the break-even point in basketballs? (round units up) 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many basketballs will have to be sold next year to earn the same net operating income as last year? 4. Refer again to the data in (2) above. The president believes the market will handle an increase in the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed above in #1), what selling price per basketball must it charge next year to cover the increased labor costs? (round to \$0.01) 5. Refer to the original data in the above table. The company is discussing the construction of a new, automated manufacturing plant. The new plant would reduce variable expenses per basketball by 40%, but it would cause fixed expenses per year to double. a) If the new plant is built, what will be the company's new CM ratio and new break-even point in basketballs? b) If the new plant is built, how many basketballs will have to be sold next year to earn the same net operating income as last year