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 42,000 of these balls, with the following results: Sales (42,000 balls) $ 1,050,000 Variable expenses 630,000 Contribution margin 420,000 Fixed expenses 265,000 Net operating income $ 154,000 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 $3.00 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 balls? 3. Refer to the data in (2) above. If 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, $154,000, 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 basketballs. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 18), what selling price per ball must it 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 by 40.00%, 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? 6. Refer to the data in (5) above. a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $154,000, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 42,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage, 4. Refer again to the data in (2) above. The president feels that the company must raise the Northwood Company wants to maintain the same CM ratio as last year (as computed in rec must it charge next year to cover the increased labor costs? 5. Refer to the original data. The company is discussing the construction of a new, automat would slash variable expenses per ball by 40.00%, but it would cause fixed expenses pery would be the company's new CM ratio and hew 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 next year to earn the sam year? b. Assume the new plant is built and that next year the company manufactures and sells year). Prepare a contribution format income statement and compute the degree of oper Complete this question by entering your answers in the tabs below. ces Req 1 Reg 2 Req3 Req 4 Reg 5 Reg 6A Reg Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of open sales level. (Round "Unit sales to break even" to the nearest whole unit and other answers to % CM ratio Unit sales to break even Degree of operating leverage balls Reg1 Req 2 > 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how m year to earn the same net operating income, $154,000, as last year? 4. Refer again to the data in (2) above. The president feels that the company must raise the sellir Northwood Company wants to maintain the same CM ratio as last year (as computed in requirem must it 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 ma would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to would be the company's new CM 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 next year to earn the same net year? b. Assume the new plant is built and that next year the company manufactures and sells 42,00 year). Prepare a contribution format income statement and compute the degree of operating Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Req 5 Req 6A Req 6B Due to an increase in labor rates, the company estimates that next year's variable expenses will inc this change takes place and the selling price per ball remains constant at $25.00, what will be next break-even point in balls? (Round "CM ratio" to 2 decimal places and "Unit sales to break even" to t CM ratio Unit sales to break even % balls Dag 1 Dan yedi break-even point in balls, and (b) the degree of operating 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will in change takes place and the selling price per ball remains constant at $25.00, what will be next year's point in balls? 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many year to earn the same net operating income, $154,000, as last year? 4. Refer again to the data in (2) above. The president feels that the company must raise the selling p Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement must it 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 manuf would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to do would be the company's new CM 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 next year to earn the same net ope year? b. Assume the new plant is built and that next year the company manufactures and sells 42,000 year). Prepare a contribution format income statement and compute the degree of operating leve Complete this question by entering your answers in the tabs below. Reg 2 Req 1 Req 4 Reg 3 Reg 5 Req 6B Req 6A Refer to the data in (2) above. If the expected change in variable expenses takes place, how many ball next year to earn the same net operating income, $154,000, as last year? (Round your answer to the Number of balls