Please help me 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 per ball, of which 60% is directlabor cost.Last year, the company sold 30,000 of these balls, with the following results:$750,000Sales (30,000 balls)Variable expensesContribution margin450,000300,000210,000$ 90,000Fixed expensesNet operating income 5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plantwould slash variable expenses per ball by 40%, but it would cause fixed expenses per year to double. If the new plant is built, whatwould be the company's new CM ratio and new break-even point in balls?6. Refer to the data in requirement 5.a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $90,000, as lastyear?b. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as sold lastyear). Prepare a contribution format income statement and compute the degree of operating leverage.

ANSWER Contribution Margin ratio = (Contribution per unit / selling price per unit)*100 Contribution…

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15 per ball, of which 60% is direct labor cost. Last year, the company sold 30,000 of these balls, with the following results: $750,000 Sales (30,000 balls) Variable expenses Contribution margin 450,000 300,000 210,000 $ 90,000 Fixed expenses Net operating income.

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15 per ball, of which 60% is direct labor cost. Last year, the company sold 30,000 of these balls, with the following results: $750,000 Sales (30,000 balls) Variable expenses Contribution margin 450,000 300,000 210,000 $ 90,000 Fixed expenses Net operating income.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 9E: Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs...

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