Question 2 Q-3 (6-Marks) 6 Points AL-ABTAL Company manufactures basketballs. The company has a ball that sells for $26. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable costs are high, totalling 517 per ball, of which 65% is direct labor cost. Grad FR 1 Sales (30,000 balls) Variable expenses Contribution margin% Fixed expenses Net operating income $ 780,000 $77777777 72% $125,000 $145,000 1. Compute the total variable cost? (1-Mark) 2. Compute the CM and the CM %? (1.Mark) 3. Compute the Break-even point? (1-Mark) 4. Due to an increase in labor rates, the company estimates that variable costs will increase by $3 per bad next year. If the change takes place and the selling price per ball remains constant at $26, what will be the new CM and break-even point in balls? ( 2 Marks) 5. Refer to the data in (point 4) above. If the expected change in variable costs takes place, how many balls will have to be sold next year to earn the same net operating income $145,000 as last year? (1 Mark) Answers: 1