Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on directlabour workers. Thus, variable expenses are high, totalling $15 per ball, of which 60% is direct labour cost. Last vear the company sold 30,000 of these balls, with the following results: Required: 1. Coyuired: Compute (a) the CM ratio and the break-even poiat is balls, and (b) the degroe of operating lewerage at last year's sales level. Doe to an increase in laboer rates, the conpuny estimales that variable expenses will increase by $3 per ball neat year. If this change takes place and the selling price per ball remaiss constant at 525 . what will be the new CM ratio and treak-even point in balls? Refer to the data in (2) above. If the expected change in variable expenses takes place. how muny bulls will have to be sold net year to earn the saene openting iscoene, $90.000, as last year? Refer apain to the data is (2) above. The president feelb that the company must raise the selling price of its backethalls. If Northwood Company wants to maintain the sanse CM ratio as last yeat, What selling price per ball must it charge neat year to cower the increased labour conts? Refer to the original data. The compuny is diseusing the consaruction of a new, automated manefacturing plam. The new plant would slash variable expenses per ball by 408 , bet it woeld casse ratio and new break even point in balls? 6. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold nest year to earn the same act th. Ascrating income, 590,000 as last year? 2. Avame the new plant is tetilt and that neat year the company manufictures and sells 30.000 compute the depree of operating leveraec. c. If you were a member of top management, would you have been in tnour of eanstructing the new plant? Explain