Northwood Company manufactures a basketball selling for $25 per unit in a small plant heavily...
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Accounting
Northwood Company manufactures a basketball selling for $25 per unit in a small plant heavily relying on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 33,750 balls, with the following results: Sales (33,750 balls) $ 843,750 Variable expenses 506,250 Contribution margin 337,500 Fixed expenses 231,000 Net operating income $ 106,500 Required: Compute (a) last year's CM ratio and the break-even point in balls and (b) the degree of operating leverage at last years sales level. Due to an increase in labor rates, the company estimates next year's variable expenses will increase by $3 per ball. If this change takes place and the selling price per ball remains
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