# Northwood company manufactures basketballs. the company has a ball

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 \$21.00 per ball, of which 60% is direct labor cost.

Last year, the company sold 41,000 of these balls, with the following results:

 Sales (41,000 balls) \$ 1,435,000 Variable expenses 861,000 Contribution margin 574,000 Fixed expenses 420,000 Net operating income \$ 154,000

Required:

1-a. Compute the CM ratio and the break-even point in balls.

1-b. Compute the the degree of operating leverage at last year’s sales level.

2. Due to an increase in labor rates, the company estimates that variable expenses will increase by \$2.80 per ball next year. If this change takes place and the selling price per ball remains constant at \$35.00, what will be the new CM ratio and break-even point in 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, \$154,000, as last year?

4.  Refer again 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 maintain the same CM ratio as last year, 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 would slash variable expenses per ball by 30%, but it would cause fixed expenses per year to increase by 76%. 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.

If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, \$154,000, as last year?

b-1 Assume the new plant is built and that next year the company manufactures and sells 41,000 balls (the same number as sold last year). Prepare a contribution format income statement

b-2 Compute the degree of operating leverage.

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.