Please help with bullet 5 and 6 LO5-4, LO5Northwood 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:$750,000Sales (30,000 balls)Variable expenses..450,000Contribution margin300,000Fixed expenses.210,000Net operating income.$ 90,000 210,000Fixed expenses .Net operating income..$ 90,000Required:1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree ofating leverage at last year's sales level.Due to an increase in labor rates, the company estimates that next year's varíable expenseswill increase by $3 per ball. If this change takes place and the selling price per ball remainsconstant at $25, what will be next year's CM ratio and the break-even point in balls?Refer to the data in (2) above. If the expected change in variable expenses takes place, howmany balls will have to be sold next year to earn the same net operating income, $90,000, aslast year?Refer again to the data in (2) above. The president feels that the company must raise the sell-ing price of its basketballs. If Northwood Company wants to maintain the same CM ratio aslast year (as computed in requirement la), what selling price per ball must it charge next yearto cover the increased labor costs?oper-2.3.4.Refer to the original data. The company is discussing the construction of a new, automatedmanufacturing plant. The new plant would slash variable expenses per ball by 40%, but itwould cause fixed expenses per year to double. If the new plant is built, what would be thecompany's new CM ratio and new break-even point in balls?6.5.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 samenet operating income, $90,000, as last year?b.a.Assume the new plant is built and that next year the company manufactures and sells30,000 balls (the same number as sold last year). Prepare a contribution format incomestatement and compute the degree of operating leverage.If YoU were a memher of ton

5. Old Variable expense per unit = $450,000 / 30,000 units = $15 New Variable expense per unit = $15…

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. the company sold 30,000 of these balls, with the following results: Last year, Sales (30,000 balls) $750,000 Variable expenses. 450,000 Contribution margin 300,000 Fixed expenses 210,000 Net operating income.. $ 90,000

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. the company sold 30,000 of these balls, with the following results: Last year, Sales (30,000 balls) $750,000 Variable expenses. 450,000 Contribution margin 300,000 Fixed expenses 210,000 Net operating income.. $ 90,000

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 16E

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