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 direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 36,000 of these balls, with the following results: Sales (36,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income. $900,000 540,000 360,000 263,000 $ 97,000