Northwood Company manufactures basketballs. The company has a ball that sells for $32. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $22.40 per ball, of which 70% is direct labor cost.

Last year, the company sold 52,000 of these balls, with the following results:

Sales (52,000 balls)	$	1,664,000
Variable expenses		1,164,800
Contribution margin		499,200
Fixed expenses		422,400
Net operating income	$	76,800

Required:

1-a.	Compute the CM ratio and the break-even point in balls. (Do not round intermediate calculations.)

1-b.	Compute the the degree of operating leverage at last years sales level. (Round your answer to 2 decimal places.)

2.	Due to an increase in labor rates, the company estimates that variable expenses will increase by $1.60 per ball next year. If this change takes place and the selling price per ball remains constant at $32.00, what will be the new CM ratio and break-even point in balls? (Do not round intermediate calculations.)