Web Slice Gollery Previous Atempt View uggested St Award: 987 out of 12.50 point

Question

Web Slice Gollery Previous Atempt View uggested St Award: 987 out of 12.50 points Northwood ballis manufactured n a smal plant tha high. to'aing $2100 per bal, of which 60% is drect labor eost at reies heavly on drect labor workers Thus, variable expenses year, the compay sols 41,000 of these balls, with the blowing results Sales (41,000 balls) Variable expenses $1.435,000 861,000 Contribuion margin Faed expenses 574,000 420,000 Net operatirng icome 5 154,000 Required 1-a. Computa last years CM rato and the break-even point in balls. Do net round intermediate Answer is complete and correct 1 Rato ?UnEsales to break -T30000 ,bals 1-b. Compute the the degree of operaling Jeverage at last year's sales leve.(Round your answer to 2 decimal places.) G Answer is complete and correct. 3 73 2. Due to an increase in labor rates, the company estimatos that next year's variable expenses wil

Explanation / Answer

2. Unit sales to break-even = Fixed costs/Contribution per unit = $420000/$11.20 = 37500 balls

Contribution per unit = Selling price - Variable costs = $35 - ($21 + $2.80) = $35 - $23.80 = $11.20

5. Unit sales to break-even = Fixed costs/Contribution per unit = $739200/$20.30 = 36414 balls

Fixed costs = $420000 x 1.76 = $739200

Contribution per unit = Selling price - Variable costs = $35 - ($21 - 30% x $21) = $35 - $14.70 = $20.30

6a. Number of balls to be sold = (Fixed expense + Target profit)/Contribution per unit = ($739200 + $154000)/$20.30 = $893200/$20.30 = 44000 balls

6b-2. Degree of operating leverage = Contribution margin/Net operating income = $832300/$93100 = 8.94

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