Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in asmall plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is directlabor cost.Last year, the company sold 31,000 of these balls, with the following results:Sales (31,000 balls)Variable expensesContribution margin$ 775,000465,000310,000215,600$ 94,400Fixed expensesNet operating incomeRequired:1. 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. Req 1Req 2Req 3CM ratioUnit sales to break evenDegree of operating leverageReq 4%Req 5Compute (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" up to the nearest whole unit and other answers to 2 decimal places.)ballsReq 6AReq 6B

The degree of operating leverage explains how a shift in sales affects a company's operational…

Northwood Company manufactures basketballs. The company has a small plant that relies heavily on direct labor workers. Thus, variable abor cost. Last year, the company sold 31,000 of these balls, with the following Sales (31,000 balls) Variable expenses Contribution margin $ 775,000 465,000 310,000

Northwood Company manufactures basketballs. The company has a small plant that relies heavily on direct labor workers. Thus, variable abor cost. Last year, the company sold 31,000 of these balls, with the following Sales (31,000 balls) Variable expenses Contribution margin $ 775,000 465,000 310,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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