Question
Problem 5-20 Various CVP Questions: Break-Even Point; Cost Structure; Target Sales [LO5-1, LO5-3, LO5-4, LO5-5, LO5-6, LO5-8] Northwood Company manufactures basketballs. The company has a
Problem 5-20 Various CVP Questions: Break-Even Point; Cost Structure; Target Sales [LO5-1, LO5-3, LO5-4, LO5-5, LO5-6, LO5-8]
Northwood Company manufactures basketballs. The company has a ball that sells for $35. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $24.50 per ball, of which 70% is direct labor cost. |
Last year, the company sold 57,000 of these balls, with the following results: |
Sales (57,000 balls) | $ | 1,995,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable expenses | 1,396,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contribution margin | 598,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed expenses | 493,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net operating income | $ | 105,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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