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Northwood Company manufactures a basketball selling for $25 per unit in a small plant heavily relying on direct labor workers. Thus. varable expenses are high, totaing $15.00 per bal, of which 60% is direct labor cost. Last year, the company sold 32,000 balls, with the following results Required: 1. Compite (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 next year's varable 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 date in requitement 2 if the expected change in variable expenses takes piece, how many balls will have to be sold next year to earn the same net operating income, $98,800, as last year? 4. Refer again to the data in requirement 2. The president feels that the company must rase the seling price of its basketballs if Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a). what selling price per ball mustit charge next year to cover the increased labor costs? 5 Refer to the orlginal data. The company is discussing the constructon of a new, automated manufacturing plant The new plant would slash varable expenses per ball by 40.00%, but it would cause foxed expenses per year to double. If the new plant is bult. what would be the company's new CM ratio and new break-even point in bals? 6. Pefer to the data in requirement 5 . o. If the new plant is bult, how many balts will have to be sold next year to cam the same net operating income, $98,800, as last year? b. Assume the new plant is bulit and that next year the company manufactures and sells 32.000 balls (the same number as sold tast yeart Prepate a contribution format income statement and compute the degree of operating leverage. Comptete this question by entering your answers in the tabs below. Refer to the data in requirement 2 . If the expected change in variable expenses takes plact, how many balls will have to be fold next year to earn the same net operating income, $98,800, as last year? Note: Round your answer up to the nearnst whole unif. Complote this question by entering your answers in the tabs below. Comovte (a) last rears CH ratio and the breakeven poirs in tats and (b) the degree of operating leverage at last yoars sales iever. Complete this question by entering your onswers in the ubs below. Due to an increase in tabor ratek, the company eibinates next years vanable expenses wal increase by so per bull, If this evin painc in bolts? Complete this question by entering your answers in the tabs below. Refer to the data in fequirement 2. If the expected change in vatiatilo oxpenses takes place, how many balls will have to be sold next yeur to cam the same net operating income, 598, opd, as tast year? Note: Moond your arower up to the hatest whale tinif. Complete this question by entering your anvwro in the tabs below. per tuli nigut it charpe neit year to cover the increased labor coits? Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below. Refer to the data in requirement 5. If the new plant is buit, how many balls will have to be sold next year to eam the same pet operating income, 590,000 , as last year? Complete this question by entering your answers in the tabs below. Refer to the data in requirement 5. Assume the new plaot is buet and that noxt year the company manutactures and sella 32,000 balls (thet same number ar cold lait year), Propare a coctribution format income statement and compute the degree operating leverage. Wotes Round "Degere of operating liverage" to 2 decinat placent
