)GK nt nt Ei'CeS Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present. the ball is manufactured in a small plant that relies 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 32.750 of these balls, with the following results: Sales (32,756 balls) $ 818,756 Variable expenses 491,256 Contribution margin 327,566 Fixed expenses 225,466 Net operating income $ 192,199 Required: 1. Compute (a) last year's CM ratio and the breakeven 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 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-even point in balls? 3. Referto the data in requirement 2. 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. $102,100, as last year? 4. Refer again to the data in requirement 2. The president feels that the company must raise the selling price of its basketballs. If 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 increased labor costs? 5. Refer to the original data. The company is discussing the construction ofa 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 requirement 5. a. lfthe new plant is built. how many balls will have to be sold next year to earn the same net operating income, $102100. as last year? b. Assume the new plant is built and that next year the company manufactures and sells 32,750 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage. Menlo Company distributes a single product. The company's sales and expenses for last month follow: Total Per Unit Sales $ 384,668 $ 29 Variable expenses 212:899 14 Contribution margin 911299 $ 6 Fixed expenses 73,899 Net operating income $ 17:466 Required: 1. What is the monthly breakeven point in unit sales and in dollar sales? 2. Without resorting to computations, what is the total contribution margin at the breakeven point? 3a. How many units would have to be sold each month to attain a target prot of $36,000? 3b. Verify your answer by preparing a contribution format income statement at the target sales level. 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. 5. What is the company's CM ratio? If the company can sell more units thereby increasing sales by $95,000 per month and there is no change in fixed expenses. by how much would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3A Reg 33 Reg 4 Reg 5 What is the monthly break-even point in unit sales and in dollar sales? Break-even pornt in unit sales units Break-even pornt in dollar sales Engberg Company installs lawn soa in nome yaras. I ne company s most recent monthly contribution format Income statement Tollows: Percent of Amount Sales Sales $ 133, 000 100% Variable expenses 53, 200 40% Contribution margin 79, 800 50% Fixed expenses 16, 060 Net operating income $ 63,800 Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 19% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 19% increase in unit sales. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the company's degree of operating leverage? (Round your answer to 2 decimal places.) Degree of operating leverage HW 06-3 i Saved Hel Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget appear below: Selling price per unit $ 26 20 Variable expense per unit $ 13 points Fixed expense per month $ 11, 310 Unit sales per month 1, 020 Skipped Required: 1. What is the company's margin of safety? (Do not round intermediate calculations.) 2. What is the company's margin of safety as a percentage of its sales? (Round your percentage answer to 2 decimal places (i.e. eBook 1234 should be entered as 12.34).) Hint Print 1. Margin of safety (in dollars) 2. Margin of safety percentage References