Northwood Company manufactures basketballs. The company has a ball that seals 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 5.75 Last year, the company sold 40,000 of these balls, with the following results: Sales (4.balls) Variable expenses Contribution margin Fixed expenses Net operating income ce.000 400.00 265,000 Required: 1. 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 2 Due to an increase in labor rates the company estimates that next year's variable expenses will increase by $300 per ball if this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break even point in bali? 3. Refer to the data in (2) above the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $135.000, as last year? 4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketball Northwood Company wants to maintain the same CM ratio as last year as computed in requirement tal what seting price perball must charge next year to cover the increased labor costs 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 boy 40.00but 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? 6 Refer to the data in (5) above a. I the new plants but how many balls will have to be sold next year to earn the same net operating income $135.000. as last year? b. Assume the new plant is built and that next year the company manufactures and sells 40 000 talls the same number as sold last year). Prepare a contribution format income statement and Compute the degree of operating leverage Complete this question by entering your answers in the tabs below