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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

Cornerstones of Cost Management (Cornerstones Series)
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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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
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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