Northwood Company manufactures a basketball selling for $$25$ per unit in a small plant heavily relying on direct labor workers. Thus, variable expenses are high, totaling $$15\mathrm{.}00$ per ball, of which $60\%$ is direct labor cost.

Last year, the company sold $31,000$ balls, with the following results:

Sales $(31,000$ balls$)$ $ $775,000$

Variable expenses $465,000$

Contribution margin $310,000$

Fixed expenses $215,600$

Net operating income $ $94,400$

Required:

Compute:

last year's CM ratio and the break$-$even point in balls and

the degree of operating leverage at last year$$s sales level.

Due to an increase in labor rates, the company estimates next year's variable expenses will increase by $$3$ per ball. If this change takes place and the selling price per ball remains constant at $$25,$ what will be next year's CM ratio and the break$-$even point in balls?

Refer to the data in requirement $2.$ 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, $$94,400,$ as last year?