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Problem 5-20 (Algo) CVP Applications: Break-Even Analysis; Cost Structure; Target Sales (LO5-1, LO5-3, 205-4, LO5-5, LO5-6, LO5-8] Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relles heavily 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 42,000 of these balls with the following results Sales (42,000 balls) $1,050,000 Variable expenses Contribution margin Fixed expenses Flet operating income 630.000 429,900 266.000 $154,000 Required: 1. Compute ta last year's CM ratio and the break-even 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 years CM ratio and the break even point in balls 3. Refer to the data in (2) above. 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, $154,000, as last year? 4. Refer again to the data in (2) above. 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 ta) what selling price per ball must it charge next year to cover the increased labor costs? 5 Refer to the orginal data. The company is discussing the construction of a new.automated manufacturing plant. The new plant would slash variable expenses per ball by 4000% but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls 6 Hefer to the data in above the new plants but how many balls will have to be sold next year to earn the same net operating income, $154,000, as last yer te the plants and that next year the company manufactures and sells 42.000 balls the same number as sold last Year Penare a contribution format income statement and compute the degree of operating leverage Complete this quest by ten was in the tabs but so an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ba e takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break- n balls? er to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be solc to earn the same net operating income, S154.000, as last year? efer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Chwood Company wants to maintain the same CM ratio as last year (as computed in requirement ta). what selling price per stit charge next year to cover the increased labor costs? Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new pla ould slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built could be the company's new CM ratio and new break-even point in balls? Refer to the data in (5) above a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $154,000, as la year? b. Assume the new plant is built and that next year the company manufactures and sells 42,000 balls (the same number as sold year). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Regs Reg 6A Reg 68 Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. (Round "unit sales to break even to the nearest whole unit and other answers to 2 decimal places.) CM Ratio Units to break even Degree of operating leverage 40.00% balls Req2 > Uy 5 increase in labor rates, the company next yedi s vaid es place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio ar s? the data in (2) above. If the expected change in variable expenses takes place, how many balls will hav en the same net operating income, $154,000, as last year? gain to the data in (2) above. The president feels that the company must raise the selling price of its bask od Company wants to maintain the same CM ratio as last year (as computed in requirement la), what sellin marge next year to cover the increased labor costs? to the original data. The company is discussing the construction of a new, automated manufacturing plant. lash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new Se the company's new CM ratio and new break-even point in balls? et to the data in (5) above. the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $ ar? Assume the new plant is built and that next year the company manufactures and sells 42,000 balls (the same nu ear). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Reg 4 Req 5 Req 6A Reg 6B 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 "Unit sales to break even to the nearest whole unit.) CM Ratio Unit sales to break even % balls s place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and t he data in (2) above. If the expected change in variable expenses takes place, how many balls will have t n the same net operating income, $154,000, as last year? gain to the data in (2) above. The president feels that the company must raise the selling price of its basketb d Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling arge next year to cover the increased labor costs? to the original data. The company is discussing the construction of a new, automated manufacturing plant. The ash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new pla be the company's new CM ratio and new break-even point in balls? r to the data in (5) above. the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $154 r? Assume the new plant is built and that next year the company manufactures and sells 42,000 balls (the same numb can). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reqs Reg 6A Roq 6B Refer to the data in (2) above. 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, $154,000, as last year? (Round your answer to the nearest whole unit.) Number of ball increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 s place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and th he data in (2) above. If the expected change in variable expenses takes place, how many balls will have to n the same net operating income, $154.000, as last year? gain to the data in (2) above. The president feels that the company must raise the selling price of its basketba od Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling pr harge next year to cover the increased labor costs? to the original data. The company is discussing the construction of a new, automated manufacturing plant. The Mash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plar be the company's new CM ratio and new break-even point in balls? er to the data in (5) above. the new plant is built, how many balls will have to be sold next year to earn the same net operating income. $154, ar? Assume the new plant is built and that next year the company manufactures and sells 42,000 balls (the same numbe ear). Prepare a contribution format income statement and compute the degree of operating leverage Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Rega Reg 4 Reg 5 Reg 6A Reg 6B Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Horthwood Company wants to maintain the same CM ratio as last year (as computed in requirement la), what selling price per ball must it charge next year to cover the increased labor costs? (Round your answer to 2 decimal places.) SICE Blls? the data in (2) above. If the expected change in variable expenses takes place, how many balls will have arn the same net operating income, $154,000, as last year? again to the data in (2) above. The president feels that the company must raise the selling price of its basket od Company wants to maintain the same CM ratio as last year (as computed in requirement la), what selling charge next year to cover the increased labor costs? er to the original data. The company is discussing the construction of a new, automated manufacturing plant. TH slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new p d be the company's new CM ratio and new break-even point in balls? efer to the data in (5) above. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $15 Hear? . Assume the new plant is built and that next year the company manufactures and sells 42,000 balls (the same num yean). Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Req1 Reg 2 Reg 3 Reg 4 Red 5 Req 6A Reg 6B 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 expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls? (Round "CM Ratio" to 2 decimal places and unit sales to break even to the nearest whole unit. Show less % CM Ratio Units to break even $ 154,000 ce (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per b Lakes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the brea balls? to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be som earn the same net operating income, $154.000, as last year? er again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If vood Company wants to maintain the same CM ratio as last year (as computed in requirement 1a). what selling price per ut charge next year to cover the increased labor costs? er to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new ple d slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is bui Id be the company's new CM ratio and new break-even point in balls? Cefer to the data in (5) above. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $154,000, as year? 6. Assume the new plant is built and that next year the company manufactures and sells 42.000 balls (the same number as solc year). Prepare a contribution format income statement and compute the degree of operating leverage Complete this question by entering your answers in the tabs below. Rog1 Peg 2 Reg 3 Reg4 Reg 5 Reg 6A Reg 6B If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $154,000, as last year? (Round your answer to the nearest whole unit.) Mutter of balle s? the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to on the same net operating income. $154,000. as last year? gain to the data in (2) above. The president feels that the company must raise the selling price of its basketbal od Company wants to maintain the same CM ratio as last year (as computed in requirement 1a), what selling pri marge next year to cover the increased labor costs? to the original data. The company is discussing the construction of a new, automated manufacturing plant. The Elash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plan "be the company's new CM ratio and new break-even point in balls? er to the data in (5) above. the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $154,0 ar? Assume the new plant is built and that next year the company manufactures and sells 42.000 balls (the same number ean Prepare a contribution format income statement and compute the degree of operating leverage. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Req6A Req 6B Assume the new plant is built and that next year the company manufactures and sells 42,000 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.) Northwood Company Conuibution Income Statusvent 5 0

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