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 labour workers. Thus, variable expenses are high, totaling $15 per ball, of which 60% is direct labour cost. Last year, the company sold 30,000 of these balls, with the following results:

Sales (30,000 balls) $ 750,000

Variable expenses 450,000

Contribution margin 300,000

Fixed expenses 210,000

Net operating income $ 90,000

Required: 1-a. Compute last year's CM ratio and the break-even point in balls.

1-b. Compute the the degree of operating leverage at last years sales level. (Round your answer to 2 decimal places.)

2. Due to an increase in labour rates, the company estimates that next year's variable expenses will increase by $3 per ball. If this change takes place and the selling price per ball remains constant at $25, 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, $90,000, as last year? (Round your answer to the nearest whole unit.)

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 1a), what selling price per ball must it charge next year to cover the increased labour costs?