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Notthwood Company manufactures basketballs. The compary has a ball that sells for $25. At present, the ba is manufactured in a small plant that relies
Notthwood Company manufactures basketballs. The compary has a ball that sells for $25. At present, the ba 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 tabor cost Last year, the company sold 32,000 of these balls, 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 rates, the company estimates that next years wariable expenses will increase by 5.00 per ball. if this change takes place and the sellang pice per ball remains constamt at $2500, 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 vatable expenses takes place, how mary bails wilt have to be sold next vear to eam the same net operating income, $98,800, as last year
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