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Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that reles heavily on direct labor workers. Thus, variable expenses are high, totaling $15 per ball, of which 60% is direct labor cost. Last year, the company sold 30,000 of these balls, with the following results: Sales (30,000 balls) Variable expenses s750,000 450,000 300,000 210,000 90,000 Fixed expenses Net operating i 1. Compute (a) last years CM ratio and the break-eten 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 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? 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 (es computed in requirement 1a), what selling price per all must it charge next year to cover the increased labor costs? 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%, 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? 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, $90,000, as last year? b. Assume the new plant is built and that next yea year). Prepare a contribution format income statement and compute the degree of operating leverage. r the company manufactures and sells 30,000 balls (the same number as sold last Complete this question by entering your answers in the tabs below. 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, $90,00 b. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same numbe 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 Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 Compute (a) last year's CM ratio and the break-eves point in balls, and (b) the degree of operating leverage at last year's sales level. (Round "Degree of operating leverage" to 2 decimal places.) 351 % balls Req 2 > Prey 3 of 4 Next > Complete this question by entering your answers in the tabs below. Req 1 Req 4 Req 5 Req 6A Req 68 Due to an increase in labor 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? CM Rato Req 1 Req3> MacBook Air a. If the new plant Is built, how many balls will have to be sold next year to earn the same net operating income, $90,000, as b. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as s 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 Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 Refer again to the data in Required (2). The president feels that the company must raise the selling price of its basketballs. If No 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 labor costs? Req 3 Req 5> MacBook Air Complete this question by entering your answers In the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 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%, but it vkould 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? CM Rato Req 4 Req BA > MacBook Air 6. Reter to the data In (S) 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, $90,000, as b. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as s year). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 Req 1 If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $90,00o, as of balls Req 6B > Next> K Prey 3 of 4ll MacBook Air DaIg WIll nave to be sold next year to earn the same net operating income, $90,000, a b. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as year. Prepare a contribution format income s ree of Complete this question by entering your answers In the tabs below Req 1 Req 2 Req 3 Req 4 Req 5 Req 6A Req 68 Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage North Stat 0 0 K Req 6A K. Prev 3 of 4 Next >
