Northwood Company manufactures basketballs. The company has a ball that sells for $35. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $24.50 per ball, of which 70 % is direct labor cost Last year, the company sold 48,000 of theso balls, with the following results Sales (48,000 balls) 3000'99 Variable expenses Contribution margin $1,680,000 1,176.000 504.000 Fixed expenses Net operating income 420,000 $ 84,000 Required: 1-8. Compute last year's CM ratio and the break-even point in balls. (Do not round intermediate calculations.) % CM Ratio balls Unit sales to break even 1-b. Compute the the degree of operating leverage at last year's sales level. (Round your answer to 2 decimal places.) Degree of operating leverage 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $1.75 per ball. If this change takes place and the selling price per ball remains constant at $35.00, what will be next year's CM ratio and the break-even point in balls? (Do not round intermediate calculations.) % CM Ratio Unit sales to break even 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, $84,000, as last year? (Do not round intermediate calculations. Round your answer to the nearest whole unit.) nheducation.com/hm.tpx 1/3 Chapter 3 Homework Number of balls
Northwood Company manufactures basketballs. The company has a ball that sells for $35. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $24.50 per ball, of which 70 % is direct labor cost Last year, the company sold 48,000 of theso balls, with the following results Sales (48,000 balls) 3000'99 Variable expenses Contribution margin $1,680,000 1,176.000 504.000 Fixed expenses Net operating income 420,000 $ 84,000 Required: 1-8. Compute last year's CM ratio and the break-even point in balls. (Do not round intermediate calculations.) % CM Ratio balls Unit sales to break even 1-b. Compute the the degree of operating leverage at last year's sales level. (Round your answer to 2 decimal places.) Degree of operating leverage 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $1.75 per ball. If this change takes place and the selling price per ball remains constant at $35.00, what will be next year's CM ratio and the break-even point in balls? (Do not round intermediate calculations.) % CM Ratio Unit sales to break even 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, $84,000, as last year? (Do not round intermediate calculations. Round your answer to the nearest whole unit.) nheducation.com/hm.tpx 1/3 Chapter 3 Homework Number of balls
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Northwood Company manufactures basketballs. The company has a ball that sells for $35. At present, the ball is manufactured in a small
plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $24.50 per ball, of which 70 % is direct labor
cost
Last year, the company sold 48,000 of theso balls, with the following results
Sales (48,000 balls)
3000'99
Variable expenses
Contribution margin
$1,680,000
1,176.000
504.000
Fixed expenses
Net operating income
420,000
$ 84,000
Required:
1-8. Compute last year's CM ratio and the break-even point in balls. (Do not round intermediate calculations.)
%
CM Ratio
balls
Unit sales to break even
1-b. Compute the the degree of operating leverage at last year's sales level. (Round your answer to 2 decimal places.)
Degree of operating
leverage
2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $1.75 per ball. If this
change takes place and the selling price per ball remains constant at $35.00, what will be next year's CM ratio and the break-even point
in balls? (Do not round intermediate calculations.)
%
CM Ratio
Unit sales to break even
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, $84,000, as last year? (Do not round intermediate calculations. Round your answer to the
nearest whole unit.)
nheducation.com/hm.tpx
1/3
Chapter 3 Homework
Number of balls
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