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 50,000 of these balls, with the following results:

Sales (50,000 balls)	$	1,250,000
Variable expenses		750,000
Contribution margin		500,000
Fixed expenses		320,000
Net operating income	$	180,000

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 companys 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, $180,000, as last year?

b. Assume the new plant is built and that next year the company manufactures and sells 50,000 balls (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. Req 1 Reg 2 Req3 Req 4 Reg 5 Req 6A Req 6B 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? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.) Show less CM Ratio Unit sales to break even balls Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Req 4 Req 5 Req 6A Req 6B If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $180,000, as last year? (Round your answer to the nearest whole unit.) Number of balls Complete this question by entering your answers in the tabs below. Req 1 Req 2 Reg 3 Req 4 Req 5 Req 6A Req 6B Assume the new plant is built and that next year the company manufactures and sells 50,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage. (Round "Degree of operating leverage" to 2 decimal places.) Northwood Company Contribution Income Statement Degree of operating leverage