Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a mall plant that relles heavily on direct laborworkers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% dire mbor cost last year, the company sold 36,000 of these balls, with the following results: $ 900,000 540,000 Sales (36,800 balls) Variable expenses Contribution margin Fixed expenses 360,000 263,000 Net operating income $ 97,888 Required: 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 leve 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 raso and the break-even coint in bella? 1. Refer to the dists 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. $97,000, as last year? Refer again to the dists 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 18), what selling price per ball must it 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 vould slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, wh vould be the company's new CM ratio and new break-even point in balls? . Refer to the dista 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, $97,000, as lest year? 6. Assume the new plant is built and that next year the company manufactures and sells 36,000 balls (the same number as sold is year). Prepare a contribution format Income statement and compute the degree of operating leverage.