Need help with questions 2-6

mpany manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relles heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 labor cost. per ball, of which 60% is direct Last year, the company sold 42.000 of these balls, with the following results: Sales (42,000 balls) s 1,050,000 Variable Contribution margin Fixed Net operating income 630,000 420,000 266,000 $ 154,000 Required: 1. Compute (a) last years CM ratio and the break-even point in bails, 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 years 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. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many bals will have to be sold next year to earn the same net operating income, $154,000, as last year? 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 must it charge next year to cover the increased labor costs? 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 4000%, but it would cause fixed expenses per year to double. If the new plant i built, what would be the company's new CM ratio and new break-even point in balls? 6. Refer to the data in (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, $154,000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 42,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 Due to an i Prev10 of 11 Next>