Question
Northwood Company manufactures basketballs. The company has a ball that sells for $35. At present, the ball is manufactured in a small plant that relies
Northwood Company manufactures basketballs. The company has a ball that sells for $35. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $24.50 per ball, of which 70% is direct labor cost. |
Last year, the company sold 48,000 of these balls, with the following results: |
Sales (48,000 balls) | $ | 1,680,000 |
Variable expenses | 1,176,000 | |
Contribution margin | 504,000 | |
Fixed expenses | 420,000 | |
Net operating income | $ | 84,000 |
1-a. | Compute the CM ratio and the break-even point in balls.
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