Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

lwood Company manufactures basketballs. The company has a ball that sells for $42. At present, the ball is manufactured in a small plant that relies

image text in transcribed
lwood Company manufactures basketballs. The company has a ball that sells for $42. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling$2520 per ball, of which 60% is direct labor cost Last year, the company sold 44,000 of these balls, with the following results Required 1-a. Compute last years CM ratio and the break-even point in balls. (Do not round intermediate calculations.) 1-b, Compute the the degree of operating leverage at last year's sales level. (Round your answer to 2 decimal places) 2. Due to an increase in labor rates, the company estimates that next years variable expenses will increase by $3.36 per ball. If this change takes place and the selling price per ball remains constant at $42.00, what will be next years CM ratio and the break-even point in balls? (Do not round intermediate calculations) 3. 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, $268,800, as last year? (Do not round intermediate calculations. Round your answer to the nearest whole unit.) 4. Refer again to the data in (2) above. 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 mustit charge next year to cover the increased labor costs? (Do not round intermediate calculations. Round your answer to 2 decimal places.) lwood Company manufactures basketballs. The company has a ball that sells for $42. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling$2520 per ball, of which 60% is direct labor cost Last year, the company sold 44,000 of these balls, with the following results Required 1-a. Compute last years CM ratio and the break-even point in balls. (Do not round intermediate calculations.) 1-b, Compute the the degree of operating leverage at last year's sales level. (Round your answer to 2 decimal places) 2. Due to an increase in labor rates, the company estimates that next years variable expenses will increase by $3.36 per ball. If this change takes place and the selling price per ball remains constant at $42.00, what will be next years CM ratio and the break-even point in balls? (Do not round intermediate calculations) 3. 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, $268,800, as last year? (Do not round intermediate calculations. Round your answer to the nearest whole unit.) 4. Refer again to the data in (2) above. 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 mustit charge next year to cover the increased labor costs? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Version 3.0

Authors: Leah Kratz, Joe Ben Hoyle, C. J. Skender

3rd Edition

1453392904, 9781453392904

More Books

Students also viewed these Accounting questions

Question

The number of male employees in the database

Answered: 1 week ago

Question

f(x)=5x3+7x + 8x + 20

Answered: 1 week ago