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Northwood Compary marnfactures basketbalis The company has a ball that seils for $25. At present; the ball is manufoctured in a small plant that relies heavily on direct labor workers Thus, vatiable expenses are high, totaling \$15.00 per bull, of which 60 \% is direct Last year, the company sold 33,000 of these balis, with the following results Reculrect: 1. Compute (a) last year's CM ratio and the break-even point in batls, and (b) the degree of operating leverage at last year't sales level 2. Due to an increase in labor rateb, the company estimates that next years variable expenses will increase by s3 oo per boll if this change takes place and the selling price per ball remains constant at 525.00 , what will be next year's CM ratio and the breakupyen point in balis? 3. Refer to the data in requirement 2 If the expected change in variable expenses takes place, how many balls wilf have to be sold next yeat to earri the same net operating income, $103,200, as lastyear? 4. Refer iegian to the data in requirement 2 . The president feele thot the company must raise the setling price of its basketoalis if Northwood Company wants to mainain the same cM rotio as last year (as computed in recuitement ta). What eellag price per bal must it charge next year to cover the increased labor costs? 5. Refer to the originat data. The compary is discussing the constructioriof a new, avtomated manufacturing piant The new plant would slash yariable expenses per ball by 4000%, but it would cause fxed expenses per ye ar to double. If the new plant is buith what would be the company' new CM ratio and new break-erven point in balls? 6. Pefer to the data in requirenient 5 a. If the new plant is buit, how many balts will have to be sold next year to earn the same net operating income, stoz 200 . as last. Compute (a) last year's CM ratio and the break-even point in balis, and (b) the degree of operating leverage at last year's sales level. (Round "Unit sales to break even" up to the nearest whole unit and othee answers to 2 decimal places?) 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 break-even point in balls? (Round "CM ratio" to 2 decimal places and round "Unit sales to break even" up to the nearest whole unit.) Refer to the dats 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, $103,200, as last year? (Round your answer up to the nearest whole uniti.) 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 selling price per bal must, it charge next year to cover the increased labor costs? (Round your answer to 2 decimal places.) 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 oxpenses per year to double. If the new plant is buit, what would be the company's new CM ratio and new break-even point in balls? (Round "CM ratio" to 2 decimal places and round "Unit sales to break even' up to the nearest whole unit.) Refer to the data in requirement 5 . If the new plant is built, how many balls will have to be sold next year to eam the same. net operating income, $103,200, as last year? (Round your answer up to the nearest whole init.) Refer to the data in requirement 5. Assume the new plant is built and that next year the company manufactures and sells 33,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage. (Round "Degree of operating leverage" to 2 decimal places.)

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