Northwood Company manufactures basketballs. The company has a ball that sells for $36. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $25.20 per ball, of which 70% is direct labor cost.

Last year, the company sold 55,000 of these balls, with the following results:

Sales (55,000 balls)	$	1,980,000
Variable expenses		1,386,000
Contribution margin		594,000
Fixed expenses		540,000
Net operating income	$	54,000

1-a.Compute the CM ratio and the break-even point in balls. (Do not round intermediate calculations.)

CM Ratio	30	%
Unit sales to break even	50,000	balls

1-b.Compute the the degree of operating leverage at last year