orthwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is anufactured In a small plant that relles heavily on direct labor workers. Thus, varlable expenses are high, totalng $15.00 er ball, of which 60% Is direct labor cost ast year, the company sold 62.000 of these balls, with the following results: Sales (62,000 balls) Variable expenses Contribution margin Fixed expenses $ 1,550, e00 930, e00 620,000 426,000 $ 194,e00 Net operating income equired: 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 ales level. Due to an Increase In labor rates, the company estimates that next year's varlable expenses will Increase by $3.00 per all. If this change takes place and the selling price per ball remalns constant at $25.00, what will be next year's CM ratio nd the break-even polnt In balls? Refer to the data In (2) above. If the expected change In varlable expenses takes place, how many balls will have to be old next year to ean the same net operating Income, $194,000, as last year?
orthwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is anufactured In a small plant that relles heavily on direct labor workers. Thus, varlable expenses are high, totalng $15.00 er ball, of which 60% Is direct labor cost ast year, the company sold 62.000 of these balls, with the following results: Sales (62,000 balls) Variable expenses Contribution margin Fixed expenses $ 1,550, e00 930, e00 620,000 426,000 $ 194,e00 Net operating income equired: 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 ales level. Due to an Increase In labor rates, the company estimates that next year's varlable expenses will Increase by $3.00 per all. If this change takes place and the selling price per ball remalns constant at $25.00, what will be next year's CM ratio nd the break-even polnt In balls? Refer to the data In (2) above. If the expected change In varlable expenses takes place, how many balls will have to be old next year to ean the same net operating Income, $194,000, as last year?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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