Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball ismanufactured in a small plant that relies heavily on direct labor workers. Thus, varlable expenses are high, totaling $15.00per ball, of which 60% Is direct labor cost.Last year, the company sold 62.000 of these balls, with the following results:Sales (62,809 balls)Variable expensesContribution marginFixed expenses$ 1,558, e08930,e00620, e00426,e00$ 194, e00Net operating incomeRequired:1. Compute (a) last year's CM ratio and the break-even polnt in balls, and (b) the degree of operating leverage at last year'ssales level.2 Due to an increase in labor rates, the company estimates that next year's varlable expenses will increase by $3.00 perball. If this change takes place and the selling price per ball remalns constant at $25.00, what wll be next year's CM ratioand the break-even polnt In balls?3. Refer to the data in (2) above. If the expected change In varlable expenses takes place, how many balls will have to besold next year to eam the same net operating Income, $194,000, as last year?4. Refer agaln to the data In (2) above. The president feels that the company must ralse the selling price of Its basketballs.If Northwood Company wants to malntaln the same CM ratio as last year (as computed In requirement 1a), what sellingprice per ball must It charge next year to cover the Increased labor costs?5. Refer to the orlginal data. The company is discussing the construction of a new, automated manufacturing plant. Thenew plant would slash varlable expenses per ball by 40.00%, but It would cause fixed expenses per year to double. If thenew plant is bult, what would be the company's new CM ratio and new break-even polnt in balls?6. Refer to the data In (5) above.a. If the new plant is bult, how many balls will have to be sold next year to earn the same net operating income.$194.000, as last year?b. Assume the new plant is bullt and that next year the company manufactures and sells 62,000 balls (the same numberas sold last year). Prepare a contribution format Income statement and compute the degree of operating leverage.Complete this question by entering your answers in the tabs belovw.Req 1Reg 2Req 3Req 4Req 5Req 6AReq 68Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. Ifthis change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and thebreak-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 evenballs Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball ismanufactured in a small plant that relies heavily on direct labor workers. Thus, varlable expenses are high, totaling $15.00per ball, of which 60% Is direct labor costLast year, the company sold 62.000 of these balls, with the following results:Sales (62,809 balls)Variable expensesContribution marginFixed expenses$ 1,558, 000930,e00620, e00426, e00Net operating income$ 194,e00Required:1. Compute (a) last year's CM ratio and the break-even polnt In balls, and (b) the degree of operating leverage at last year'ssales level.2 Due to an Increase In labor rates, the company estimates that next year's varlable expenses will Increase by $3.00 perball. If this change takes place and the selling price per ball remalns constant at $25.00, what will be next year's CM ratioand the break-even polnt in balls?3. Refer to the data in (2) above. If the expected change In varlable expenses takes place, how many balls will have to besold next year to eam the same net operating Income, $194,000, as last year?4. Refer agaln to the data In (2) above. The president feels that the company must ralse the selling price of Its basketballs.If Northwood Company wants to malntaln the same CM ratio as last year (as computed In requirement la), what sellingprice per ball must it charge next year to cover the Increased labor costs?5. Refer to the orlglinal data. The company is discussing the construction of a new, automated manufacturing plant. Thenew plant would slash varlable expenses per ball by 40.00%, but It would cause fixed expenses per year to double. If thenew plant Is bult, what would be the company's new CM ratlo and new break-even polnt in balls?6. Refer to the data in (5) above.a. If the new plant Is bult, how many balls will have to be sold next year to earn the same net operating Income.$194,000, as last year?b. Assume the new plant is bult and that next year the company manufactures and sells 62,000 balls (the same numberas sold last year). Prepare a contributlon format Income statement and compute the degree of operating leverage.Complete this question by entering your answers in the tabs belovw.Req 1Req 2Req 3Req 4Req 5Req 6AReq 68Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year'ssales level. (Round "Unit sales to break even" to the nearest whole unit and other answers to 2 decimal places.)CM RatioUnit sales to break evenballsDegree of operating leverage

Contribution margin per unit = selling price per unit - variable cost per unit Contribution margin…

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totalling $15.00 per ball, of which 60% Is direct labor cost Last year, the company sold 62000 of these ballis, with the following results: Sales (62,000 balls) Variable expenses Contribution margin Fixed expenses $ 1,55e,eee 930,000 620,000 426, 000 194, 000 Net operating incone Required: 1. Compute (a) last year's CM ratio and the break-even polnt 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 break-even polnt in balls? 3. Refer to the data in (2) above. If the expected change in varlable expenses takes place, how many balls will have to be sold next year to eam the same net operating income. $194,000, as last year? 4. Refer agaln 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 malntain the same CM ratio as last year (as computed in requirement 1a), what selling price per ball must t charge next year to cover the Increased labor costs? 5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash varlable 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? 6. Refer to the data in (5) above. a. If the new plant is bult, how many balls will have to be sold next year to earn the same net operating Income. $194,000, as last year? b. Assume the new plant is bult and that next year the company manufactures and sells 62,000 balls (the same number as sold last year). Prepare a contribution format Income statement and compute the degree of operating leverage.