Problem 6-20 (Algo) CVP Applications: Break-Even Analysis; Cost Structure; Target Sales [LO6-1, LO6-3, LO6-4, LO6-5, LO6.6, LO6-8] 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 ate high, totaling $15.00 per ball, of which 60% is direct labor cost Lastyear, the company sold 30,750 of these bolls, with the following results: Required: 1. Compute (o) last yeor's CM ratio and the break-even point in bolis, and (b) the degree of operating leverage at last year's saies level. 2. Due to an increase in iabor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball if this change takes place and the seling price per boll remains constant at $25.00, what will be next year's CM ratio and the break-even point in bails? 3. Refer to the dota in requirement 2. If the expected change in variable expenses tokes place, how many balls will have to be sold next year to earn the same net operating income, 593.300, as last year? 4. Refer again to the dota in requirement 2. The president feels that the company must rase the seling pike of its basketbalis. If Nortiwood Company wants to maintain the same CM ratio as lastyear (as computed in requirement to), what selling price per bail mustit eharge nent year to cover the increased labor costs? 5. Roler to the original data. The company is discussing the consiruction of a new, automated manufacturing plant. The new plant would slash variabie expenses per bail by 40.00%, but it would cause fixed expenses per year to double. If the new plant is buit, what would be the company's new CM abo and new breakeven point in balls? 6: freter to the data in requirement 5 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 fates, the company estimates that next year's variable expenses will increase by $3.00 per bali. 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 requitement 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, $93,300, as last year? 4. Refer again to the data in requirement 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 seliling price per ball must it charge next year to cover the increased labor costs? 5. Refer to the otiginal 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 plont is bulit, what would be the company's new CM ratio and new break-even point in balls? 6. Refer to the data in requirement 5. a. If the new plant is bult, how many balls will have to be sold next year to eam the same net operating income, $93,300, as last year? b. Assume the new plant is bullt and that next year the company manufactures and seils 30,750 balls (the same number as sold last yearh. Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Compute (a) lavt wear's CM ratio and the break-even point in balis, and (b) the degree of operating leverage at last yeary? sales leveli (Round "unit sales to break even" up to the nearest whole unit and oqher answers to 7 dedmat places? change takes place and the seling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in bails? 3. Refer to the data in requirement 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, $93,300, as last year? 4. Refer again to the data in requirement 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 1a), 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 requirement 5 . a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $93,300, as last year? b. Assume the new plant is buil and that next year the company manufactures and sells 30.750 balls (the same number as sold last 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. Due to an increase in'labor rotes, the company estimates that next year's variable expenses will increase by 53.00 per bair. If this change takes place and the seling price per bail 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 round "Unit sale to break even" up to the neareit whole unit; 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 requirement 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; $93,300, as last year? 4. Refer again to the data in requirement 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 fa), what selling price per bail 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 balis? 6. Refer to the data in requirement 5. a. If the new plant is bultt, how many balls will have to be sold next year to eam the same net operating income, $93,300 as last year? b. Assume the new plant is built and that next year the company manufoctures and seils 30.750 bails the same number as sold last 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. Refer to the data in requirement 2. If the expected change in variable expences takes place, how many balis wave to bet sold next year to eam the same net operating income. 393,300 , as last year? (Racint your anawer up to the nearesk whole unit: 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 requirement 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, $93,300, as last year? 4. Refer again to the data in requirement 2. The president feels that the company must raise the selling price of its basketbalis. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling price per balf 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 piant is built, what would be the company's new CM ratio and new break-even point in balis? 6. Refer to the data in requirement 5 . a. If the new plant is built, how many balis will have to be sold next year to earn the same net operating income, $93,300, as last year? b. Assume the new plant is built and that next year the company manufactures and sells 30,750 balls (the same number as soid last 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. Refer again to the data in requirement 2. The president feeis that the company must raise the seiling price of its basketbalis. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement ta\}, What seliing price per ball must it charae next year to cover the increased laboc costs? (Round your answer to 2 decimal places. change takes place and the selling price per bail remains constant at $25.00, what will be next year's CM ratio and the break-even point in balks? 3. Refer to the data in requirement 2. If the expected change in variable expenses tokes piace, how many bills will have to be sold next year to eam the same net operating income, $93,300, as last year? 4. Refer again to the data in requirement 2. The president feels that the company must raise the seling price of its bosketbaiis. If Northwood Company wants to maintain the same CM ratio as last ycar (as computed in reguirement tal what selling price per ball thust it charge next year to cover the increased labor costs? 5. Refer to the original data. The compary is discussing the construction of a new, automated manufacturing plant. The nev plant would slash variable expenses per bail by 40.00%, but it would cause fixed expenses peryear to double. if the new plant is built, what: would be the company's new CM ratio and new break-even point in bahs?? 6. Refer to the data in requirement 5. a. Ht the new plant is bailt, how many bolls wail have to be soid next yoat to earn the same net operating income, 593,300, as last. year? b. Assume the new plant is buit and that nextyear the company manufoctures and seils 30,750 balis the same number as sold last: year). Prepare a contribution format income statement and compute the degree of operating leverape Complete this question by entering rour answers in the tabs beiow. 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 requirement 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, $93,300, as last year? 4. Refer again to the data in requirement 2. The president feels that the company must raise the selling price of its basketbalis. If Northwood Company wants to maintain the same CM ratio as last year (as computed in requirement la), what selling price per bali 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 buiit, what would be the company's new CM ratio and new break-even point in balls? 6. Refer to the data in requirement 5 . a. If the new plant is built, how many balls will have to be sold next year to earn the some net operating income, $93,300, as last year? b. Assume the new plant is built and that next year the company manufactures and selis 30,750 balls pere same number as sold last year). Prepare a contribution format income statement and compute the degree of operating foverage. Complete this question by entering your answers in the tabs below. Refer to the data in requirement 5. If the new plant is built, how many balis will have to be sold next year to earn the same: net operating income, $93,300, as last year? (hound your anywer up to the nearest whiole unit.) a. If the new plant is built, how many balls will have to be sold next year to earn the same year? b. Assume the new plant is built and that next year the company manufactures an, sells 30,7 year). Prepare a contribution format income statement and compute the degree ci operating Complete this question by entering your answers in the tabs below. Refer to the data in requirement 5. Assume the new plant is built and that next year the company manu 30,750 balls (the same number as sold last year). Prepare a contribution format income statement and c operating leverage. (Round "Degree of operating leverage" to 2 decimal places.)