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Seved Help Problem 5-20 CVP Applications: Break-Even Analysis; Cost Structure; Target Sales (LO5-1, LO5-3, LOS- 4, LO5-5, LO5-6, LO5-8) 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 labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost Last year, the company sold 50,000 of these balls, with the following results: Sales (50,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $1,250,000 750,000 320.000 $ 180,000 500,00 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 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? 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. $180,000, 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 (as computed in requirement 10), what selling price per ball 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 40.00%, 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? 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, $180,000, 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 format income statement and compute the degree of operating leverage. 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 ng would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant 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 toe the same net operating income, $180,000 b. Assume the new plant is built and that next year the company manufactures and sells 50,000 balls (the same number 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. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Req 6A Reg 6B 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. (Round "Unit sales to break even" to the nearest whole unit and other answers to 2 decimal places.) CM Ratio Unit sales to break even Degree of operating leverage balls Reg 1 Reg 2 > Saved year to earn the same net operating income, $180,000, as last year? 4. Refer again to the data in (2) above. The president feels that the company must Northwood Company wants to maintain the same CM ratio as last year (as compute 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, a would slash variable expenses per ball by 40.00%, but it would cause fixed expense 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 b. Assume the new plant is built and that next year the company manufactures and year). Prepare a contribution format income statement and compute the degree of Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Req 4 Req 5 Req 6A Due to an increase in labor rates, the company estimates that next year's variable exp this change takes place and the selling price per ball remains constant at $25.00, what break-even point in balls? (Round "CM Ratio" to 2 decimal places and "Unit sales to bre CM Ratio Unit sales to break even balls year to earn the same net operating income, $180,000, 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 basketbal Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 10), what selling pri 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 would slash variable expenses per ball by 40.00%, but it would cause foxed expenses per year to double. If the new pla 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, $180,01 b. Assume the new plant is built and that next year the company manufactures and sells 50,000 balls the same number 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. Req1 Reg 2 Rig 3 Reg 4 Req 6A Req 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 balls po, as test your pomeno unas veces unang wans am HUU UUSALEM year to earn the same net operating income, $180,000, 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 basketbal Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement la), what selling pe 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 would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new pla 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, $180.0 b. Assume the new plant is built and that next year the company manufactures and sells 50,000 balls (the same numbe year). Prepare a contribution format income statement and compute the degree of operating leverage. 0.001 book even put mene year actures or ODER Complete this question by entering your answers in the tabs below. Reg 2 Req1 Reg 3 Regla Reg 5 Req6A Req 68 Refer again to the data in Required (2). The president feels that the company must raise the selling price of its basketballs. Northwood 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? (Round your answer to 2 decimal places.) Selling price Regs > wie www Uvuv. GAELICU HYRIC CAP une year to earn the same net operating income, $180,000 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. Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 18), what selling price 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, outomated manufacturing plant. The new would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is 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, $180,000 b. Assume the new plant is built and that next year the company manufactures and sells 50,000 balls (the same number as 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. Reg 1 Reg 2 Reg 3 3 Req 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 CM Ratio Unit sales to break even % alls b 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be se year to earn the same net operating income, $180,000, 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. Northwood Company wants to maintain the same CM ratio as last year as computed in requirement tal, what selling prices 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 nev would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plantis 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, $180.000 b. Assume the new plant is built and that next year the company manufactures and sells 50,000 balls (the same number as 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. Reg 1 Reg 2 Reg 3 Req5 Reg 6 Regta 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 bals