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 heavly on direct labor workers. Thus, varlable expenses are high, totaling $$15\mathrm{.}00$ per ball, of which $60\%$ is direct

labor cost.

Last year, the company sold $30,250$ of these balls, with the following results:

Required:

Compute $($a$)$ last year's CM ratio and the break$-$even point in balls, and $($b$)$ the degree of operating leverage at last year's sales level.

Due to an Increase in labor rates, the company estimates that next year's varlable expenses will Increase by $$3\mathrm{.}00$ per ball. If this

change takes place and the selling price per ball remains constant at $$25\mathrm{.}00,$ what will be next year's CM ratio and the break$-$even

point In balls?

Refer to the data In requlrement $2$ If the expected change in varlable expenses takes place, how many balls will have to be sold

next year to earn the same net operating income, $$91,100,$ as last year?

Refer again to the data in requirement $2.$ The president feels that the company must ralse the selling price of its basketballs. If

Northwood Company wants to maintain the same CM ratio as last year $($as computed in requirement $1$a$),$ what selling price per ball

must It charge next year to cover the Increased labor costs?

Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant

would slash varlable expenses per ball by $40\mathrm{.}00\%,$ but it would cause fixed expenses per year to double. If the new plant is bullt, what

would be the company's new CM ratlo and new break$-$even point in balls?

Refer to the data in requirement $5.$

a$.$ If the new plant is bullt, how many balls will have to be sold next year to earn the same net operating Income, $$91,100,$ as last

year?

b$.$ Assume the new plant is bult and that next year the company manufactures and sells $30,250$ balls $($the same number as sold last

year$).$ Prepare a contribution format Income statement and compute the degree of operating leverage.

Answer is not complete.

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Req$2$

Req $5$

Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new

plant would slash variable expenses per ball by $40\mathrm{.}00\%,$ but it would cause fixed expenses per year to double. If the new

plant is built, what would be the company's new CM ratio and new break$-$even point in balls? $($Round $"$CM Ratio" to $2$ decimal

places and round "Unit sales to break even" up to the nearest whole unit.$)$