I have some incorrect answers already filled into the blanks. Please ignore thes

Question

I have some incorrect answers already filled into the blanks. Please ignore these 4. value: 5.00 points Northwood Company manufactures basketballs. The company has a ball that sells for $30. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $18.00 per ball, of which 60% is direct labor cost Last year, the company sold 51,000 of these balls, with the following results: Sales (51,000 balls) Variable expenses $1,530,000 918,000 Contribution margin Fixed expenses 612.000 492,000 Net operating income S 120,000 Required: 1-a Compute the CM ratio and the break-even point in balls. (Do not round intermediate calculations.) CM Ratio 40% Unit sales to break even 41,000 balls 1-b. Compute the the degree of operating leverage at last year's sales level (Round your answer to 2 decimal places.) 5.10

Explanation / Answer

Contribution Margin (CM): It is the difference between the companies sales and variable expenses. It is used by the entity to caclulate the earnings available to pay the fixed expenses.

revenue (Sales)=1,530,000

Variable expenses=918

Contribution Margin=612

CM ratio=sales-variable expenses/sales

1,530000-918/1530000=0.9994

CM per unit=83.33

Sales per unit=30

CM Margin ratio=CM per Unit/Sales per Unit

5) New CM ratio: 29.9892

New break even=29.51

CM Margin Ratio: 83.33/30=2.77

Unit sale to breakeven is $16

Degree of Operating Leverage is 1.000

2) New CM ratio if the variable cost increase by $2.40 is 27.582

Break even is 17.83

The number of balls that have to be sold is 40300

6) 18000 balls have to be sold

Net operating leverage is 65

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.