I just want question 6 I left question 5 cos it's needed for 6.

HW LO 38 39 PROBLEM 3-20 Various CVP Questions: Break-Even Point; Cost Structure; Target Sales (L03-1, L03-3, LO3-4, LO3-5, L03-6, L03-8) 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 Required: 2. at last years Sales - lapor rates, the company estimates that variable expense...........se wys per all next year. It is change lancs place nor hall remains con- stant at $25 what will be ...cuata in requirement 2 above. If the experieuc... nenses takes place, how manual same net operating income, Keter again CULTILLSTICLYDC. must the same verhall muretit charen 5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40%, 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 above. a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income. $90,000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage. If you were a member of top management, would you have been in favor of constructing the new plant? Explain. c