Gaza Company manufactures basketballs. The company has a ball that sells for $30. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $20 per ball. Last year, the company sold 30,000 of these balls, with the following results: Sales (30,000 balls) $750,000 Required: 1. 2. 3. 4. 5. Variable expenses Fixed expenses 440,000 210,000 Compute (a) the CM ratio and the break-even point in balls Using CM method. (b) Compute the degree of operating leverage at last year's sales level Due to an increase in labor rates, the company estimates that variable expenses will increase by $2 per ball next year. If this change takes place and the selling price per ball remains constant at $30, what will be the new break-even point in dollar's? 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(target), $90,000, as last year? Using Equation method. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Gaza Company wants to maintain the same CM ratio as last year, what selling price per ball must it charge next year to cover the increased labor costs? Refer to the original data. Compute the company's margin of safety in both dollar and percentage form