Question
Northwood Company manufactures basketballs. The company has a ball that sells for $30. At present, the ball is manufactured in a small plant that relies
Northwood Company manufactures basketballs. The company has a ball that sells for $30. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $18.00 per ball, of which 60% is direct labor cost. |
Last year, the company sold 51,000 of these balls, with the following results: |
Sales (51,000 balls) | $ | 1,530,000 |
Variable expenses | 918,000 | |
Contribution margin | 612,000 | |
Fixed expenses | 492,000 | |
Net operating income | $ | 120,000 |
1-a. | Compute last year's CM ratio and the break-even point in balls. (Do not round intermediate calculations.)
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b-1. | Assume the new plant is built and that next year the company manufactures and sells 51,000 balls (the same number as sold last year). Prepare a contribution format income statement (Do not round your intermediate calculations.)
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