Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relles heavily on direct labor workers. Thus, variable expenses are bigh, fotaling $15.00 per ball, of which 60% is direct labor cost Last year, the company sold 31,750 of these balls, with the following results: Required: 1. Compute (0) last year's CM ratio and the brebk-even point in balls, and (b) the degree of operating leverage at iast year's sales lever 2. Due to an increase in labor tates, the company estimates that next year's variable expenses will increase by $300 per ball. If this change takes piace and the seling price per boll remains coristant at 52500 , whot wil be next year's CM ratio and the break-even point in bals? 3 Refer to the date in requirement? If the expected change in varible expenses takes place. how many balls will have to be sold next year to eam the same net operoting income. $97,700, as last year? 4. Refer agoin to the data in requiement2. The president feels that the company must raise the selling price of its basketballs if Northwood Company warts to maintain the same CM ratio as astyear (os computed in requirement al), what selling price per ball must it charge nextyear to cover the increased lobor sosts? 5. Refer to the original dota The compacy is discussing the constraction or a new, automated manufacturing piant. The new piant would stash varible expenses per bal by 4000m but it would couse fixed expenses per yeat to double if the new plant is buit, What woulo be the compaby's new CM ratio and new breakeven point in balls? 6. Rerer to the data in iequirement 5 . s If the new plant 55 buit, bow mary balls witt have to be sold nexty year to esm the same ner operating income, 597700 , as last year? b Assume the new phant is buittand that nent year the compary manufactures and sells 31750 balis (the same number as sold Iastiyear) Prepare a contripution format income statement and compute the degree of operating leverage