Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufoctured in a small plant that relies heavily on direct labor workers. Thus, yarlable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 33.750 of these balis, with the following results: 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 tates, the company estimotes 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 balis? 3. Refer to the data in requirement 2. 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, $106,500, as last year? 4. Refer again to the data in requirement 2. 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 fa), what selling price per ball must it charge next year to cover the increased labor costs? 5. Refer to the original doto. The company is discussing the construction of a new, automated manufacturing piont. 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 buitt, what would be the company's new CM ratio and new break-even point in balls? 6. Refer to the data in requirement 5 . a. If the new plant is built. how many balls will have to be sold next year to earn the same net operating income, $106,500. as last year? b. Assume the new plant is built and that next year the company manufactures and selis 33.750 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage