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Northwood Company manufactures basketballs. The company has a ball that sells for $36. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $21.60 per ball, of which 60% is direct labor cost. Last year, the company sold 56,000 of these balls, with the following results Sales (56,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $2,016,000 1,209.600 806,400 662,400 S 144,000 Required 1-a. Compute last years CM ratio and the break-even point in balls. (Do not round intermediate calculations.) Answer is complete and correct. 40 96 46,000balls CM Ratio Unit sales to break 1-b. Compute the the degree of operating leverage at last year's sales level. (Round your answer to 2 decimal places.) Answer is complete and correct. gree of operating 5.60 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $2.88 per ball. If this change takes place and the selling price per ball remains constant at $36.00, what will be next years CM ratio and the break-even point in balls? (Do not round intermediate calculations.) Answer is complete and correct. CM Ratio 32 % Unit sales to break 57,500balls

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