Northwood Company manufactures basketbalis. The company has a ball that selk for $25. At prestyt, Uie bail a manufacturied a a small plant that reies heavidy on direct labor wokkers. Thus, yariable expenses are hiph, totaling 54500 per ball of which 60% is direct labor cost. Last yeat, the company cold 33,000 of these toals, with the following resuits: Required: 1. Compute (a) last year's CM ratio and the break-even point in bols, and (b) the cegree of operating leverage at last year s soles kevel 2 Due to an increase in labor rates, the company estimates that next years varibbe expences will increase by 5300 per boil if tils change takes place and the selling pnce per bali remains constant at $25.00. What will be next yoar's CM ratio and the break-even point in balls? 3. Refer to the data in requirement 2. If the expected change in variable expenses takes place haw many balls will have to be scld next year to eam the same net opeiating income, $103.200, as last year? 4. Refer again to the data in requirement 2 . The president feels that the compony must rase toue selling paice of ins busketballs. if Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement la). what souing paice per bar) must ti 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 manufocturne plant, The new plant. would slash variable expenses per bali by 40.00%, but it would cause fored expenses peryear to double. if the new plant is built, what. would be the companys new CM ratio and new break-even point in balls? 6. Refer to the data in requirement 5 ; a. If the new plant is built, how many balls wil have to be sold next year to earn the same net operating income, 5103,200 as last year? b. Assume the new plant is buit and that next year the company manufactures and sells 33,000 balls fue same number as sold last yeat) Prepare a contribution format income statement and compute the degree of operating leverage