CoursHeroTranscribedText: 14E orthwood Company manufactures basketballs. The company has a ball that sells for $25....
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CoursHeroTranscribedText: 14E orthwood Company manufactures basketballs. The company has a ball that sells for $25. At " s manufactured 1n a small plant that relies heavily on direct labor workers. t+ Down to View suggestions 'l'hus, varlable expenses are high, totaling $15.00 per ball, ofwhich 60% IS direct labor cost. Last year, the company sold 32,500 of these balls, With the following results: Sales (32,500 $ balls) 812,500 Variable expenses 487,500 Contpibution 325,000 margin Fixed expenses 224,000 Net operating $ income 101,000 Requhed: 1. Compute (a) last year's CM ratio and the breakeven 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 breakeven point in balls
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