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Need help with the 2 blank questions. Northwood Company manufactures basketballs. The company has a ball that sells for $49. At present, the ball is
Need help with the 2 blank questions.
Northwood Company manufactures basketballs. The company has a ball that sells for $49. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $34.30 per ball, of which 70% is direct labor cost. Last year, the company sold 58,000 of these balls, with the following results: 2,842,000 Sales (58,000 balls) Variable expenses Contribution margin 1,989,400 852,600 705,600 Fixed expenses Net operating income $ 147,000 Required 1- Compute last year's CM ratio and the break-even point in balls. (Do not a. round intermediate calculations. Round up your final break even answers to the nearest whole number.) CM Ratio 30 | % Unit sales to break|48,000 balls even 1- b. Compute the the degree of operating leverage at last year's sales level. (Round your answer to 2 decimal places.) egree of operating evera 5.80 2. Due to an increase in labor rates, the company estimates that next years variable expenses will increase by $4.90 per ball. If this change takes place and the selling price per ball remains constant at $49.00, what will be next years CM ratio and the break-even point in balls? (Do not round intermediate calculations. Round up your final break even answers to the nearest whole number.) CM Ratio 201% Unit sales to break| 72,000 balls even 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, $147,000, as last year? (Do not round intermediate calculations. Round your answer to the nearest whole unit.) Number balls 87,000 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? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Step by Step Solution
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