HW LO 38 39 PROBLEM 3-20 Various CVP Questions: Break-Even Point; Cost Structure; Target Sales (L03-1, LO3-3, LO3-4, L03-5, LO3-6, LO3-8] 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 per ball, of which 60% is direct labor cost. Last year, the company sold 30,000 of these balls, with the following results: Sales (30,000 balls) Variable expenses Contribution margin Fixed expenses... Net operating income $750,000 450,000 300,000 210.000 $ 90,000 Requirem 2. Due to an increase in labor rates, the company estimates that variable expenses will increase by S3 per ball next year. If this change takes place and the selling price per ball remains con- stant at $25, what will be the new CM ratio and break-even point in balls