PLEASE HELP
Part 1
1.Magic Realm, Inc., has developed a new fantasy board game. The company sold 60,000 games last year at a selling price of $61 per game. Fixed expenses associated with the game total $1,100,000 per year, and variable expenses are $41 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor.
Required:
1-a. A contribution format income statement for the game last year.
1-b. Compute the degree of operating leverage.
2. Management is confident that the company can sell 75,000 games next year (an increase of 15,000 games, or 25%, over last year). Given this assumption:
a. What is the expected percentage increase in net operating income for next year?
b. What is the expected amount of net operating income for next year? (Do not an income statement; use the degree of operating leverage to compute your answer.)
\fComplete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Reg 6A Reg 68 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 ballsComplete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4 Reg 5 Reg 6A Reg 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 40.00%, 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 A CM Ratio Unit sales to break even ballsComplete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3 Reg 4 Reg 5 Reg 6A Reg 68 Refer again to the data in Required (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 la), what selling price per ball must it charge next year to cover the increased labor costs? ( Round your answer to 2 decimal places.) Selling price\fComplete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3 Reg 4 Reg 5 Reg 6A Reg 68 Due to an increase in labor rates, the company estimates 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 balls? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.) CM Ratio Unit sales to break even balls\fReg 1 Reg 2 Req 3 Reg 4 Reg 5 Reg 6A Reg 68 Refer to the data in Required (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, $180,000, as last year? (Round your answer to the nearest whole unit. ) Number of ballsComplete this question by entering your answers in the tabs below. Req 1 Reg 2 Req JA Req 30 Reg 4 Req 5 What is the company's CM ratio? If sales increase by $57,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? CM ratio Net operating income increases byNorthwood Company manufactures basketballs. The company has a ball that sells for $25. At present. the ball is manufactured in a small plant that relies heawa on direct labor workers Thus. variable expenses are high. totaling $15.00 per ball. of which 50% is direct labor cost. Last year. the company sold 50.000 ofthese balls. mm the following results: Sales {53,339 ham) s 1.2511393 Iv'ar'iatlle expenses 7531.393 Contribution margin SEEM Fixed expenses 3131-\" Met operating income 5 1331.393 [ Required: 1. Compute ta] Iastyear's CM ratio and the break-even point in balls. and {b1 the degree ofoperating leverage at last year's sales level. 1 Due to an increase in labor rates. the company estimates that next year's variable expenses will increase by $3.00 per ball. l'fthis 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 balls\"? 3. Refer to the data in {,2} above. Ifthe expected change in variable expenses takes place. how many balls will have to be sold next year to earn the same net operating income. $180000. as last year? 4. Refer again to the data in [2} above. The president feels that the company must raise the selling price ofits basketballs. If Northwood Company warms to maintain the same CM ratio as lastyear {as computed in requirement 1a}. what selling price per ball must it charge next yearto cover the increased labor costs? 5. Refertothe original data. The company is discussing the constniction of a new. automated manufacturing plant The new plant would slash variable expenses per ball by 40.00%. but it would cause xed expenses per yearto double. If the new plant is built. what would be the company's new CM ratio and new break-even point in balls? I5. Referto the data in {51 above. a. Ifthe new plant is built. how many balls will have to be sold next year to eam the same net operating income. $130000. 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 fon'nat income statement and compute the degree of operating leverage. Req2 Reqa H 115qu qus H Heqliu. :13qu Con-11.112 [a] last year's Gil ratio and the break-eves point in bells. and {b} the degree ofnperating leverage a]: leaf: year's sells level. {Round \"Unit sala to break even" to the I'lBal'Et whole unit and other armvers b: 2 decimal 1113135.} Reql _m - Degreeof opereiing leverage Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Reg 6A Reg 68 Assume the new plant is built and that next year the company manufactures and sells 50,000 bells ( 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
