Northwood Company maniafactures basketballs. The company has a ball that selis for $2.5. At present, the ball is mariufactured in a small plant that telies heavily on direct labor workers. Thus, variable expenses are high, totaling 515.00 per ball, of which 606 is direct labor cost Last year, the comparry sold 34,000 of thgse balls, with the following results: Required: 1. Compute (a) last year's CM ratio and the break-even polint in balls, 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 year's varlable expenses will Increase by 53.00 per ball. If this change takes place and the selling price per ball remains constant at 525.00. What will be next yeai'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 balls will have to be sold next year to eam the same net operating income, $128.000, as last year? 4. Refer again fo the data in (2) above. The president feels that the company must raise the selling price of its basketbalis, if Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement la), what selling price per ball must it chatge 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 bail by 40.00%, but it would cause fixed expenses per year to double. If the new plant is buit, what would be the company's new CM ratio and new break-even point in balls? 5. Reter to the data in (5) above. a. If the new plant is built, how many balis will have to be sold riext year to eam the same net operating income, 5128.000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 34,000 balls (the same number as sold last year) Prepare a contribution format income statement and compute the degree of operating leverade