Hi - Here is my assignment.

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 48,000 of these balls, with the following results:

Sales (48,000 balls) $1,200,000

Variable expenses 720,000

Contribution margin 480,000

Fixed expenses 319,000

Net operating income $161,000

CM Ratio: 10/25*100 = 40.00% Unit sales to break even: 319,000/10 = 31,900 balls Degree of operating leverage: 480,000/161,000 = 2.98

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?

Answer: CM Ratio: 7/25*100 = 28.00% Unit sales to break even: 319,000/7 = 45,571 balls

3.how many balls will have to be sold next year to earn the same net operating income, $161,000, as last year?

Answer: Number of balls: 68,571

161,000 = (25 x units) - (18 x units) - 319,000

480,000 = 7 x units

Units: 68,571

Selling price per ball nexxt year to cover increased labor cost?

I am stuck on how to get the sales price without knowing how to get the new variable expenses.

CM ratio = ((Sales Price x units) - New Variable expenses) / (Sales Price x units)