Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help me to answer the questions, it is important beacause this is graded value: 10.00 points Northwood Company manufactures basketballs. The company has a

Please help me to answer the questions, it is important beacause this is graded

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed
value: 10.00 points 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 30000 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 15 90,000 Required: 1a. Compute last year's CM ratio and the breakeven point in balls. Unit sales to break even 1b. Compute the the degree of operating leverage at last year's 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 breakeven point in balls? Unit sales to break even 3. Refer to the data in (2] above. If the expected change in variable expenses takes place, hovlr 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.) :ll 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 ( 25 computed in requirement la ) , what selling price per ball must it charge next year to cover the increased labour costs? Selling price 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 ? CM Ratio Unit sales to break even balls6. 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? :|l b1_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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Information For Business Decisions

Authors: Loren A Nikolai, Billie Cunningham, John D Bazley

3rd Edition

1111066884, 9781111066888

More Books

Students also viewed these Accounting questions

Question

Determine the of ????2 when (a) ???? = 0.83. (b) ???? = .77.

Answered: 1 week ago

Question

What is the purpose of a retaining wall, and how is it designed?

Answered: 1 week ago

Question

How do you determine the load-bearing capacity of a soil?

Answered: 1 week ago

Question

what is Edward Lemieux effect / Anomeric effect ?

Answered: 1 week ago

Question

Define Management by exception

Answered: 1 week ago

Question

Personal role: This consists of service to family and friends.

Answered: 1 week ago

Question

The role of life: It consists of your own service to yourself.

Answered: 1 week ago