Solution 1:
Contribution margin ratio = Contribution margin / sales = $600,000
/ $1,500,000 = 40%
Contribution margin per unit = $25 - $15 = $10 per unit
Breakeven sales units = Fixed cost / contribution margin per unit =
$375,000 / 10 = 37500 units
Degree of operating leverage = Contribution margin / Net operating
income = $600,000 / $225,000 = 2.67
Solution 2:
New variable cost per unit = $15 + $3 = $18 per
ball
new contribution margin per unit = $25 - $18 = $7 per unit
New contribution margin ratio = $7 / $25 =28%
New breakeven point in balls = $375,000 / $7 = 53571 units
Solution 3:
Nos of balls to be sold to earn target income = (Fixed cost +
Target profit) / contribution margin per unit
= ($375,000 + $225,000) / $7 = 85714 units
Solution 4:
Variable cost per unit = $18 per unit
Required contribution margin ratio = 40%
required variable cost ratio = 60%
New selling price per unit = $18 / 60% = $30 per unit
Solution 5:
New variable cost per unit = $15 * 60% = $9 per unit
New contribution margin per unit = 25- $9 = $16 per unit
New fixed costs = $375,000*2 = $750,000
New CM ratio = $16/$25 = 64%
New breakeven point = $750,000/ $16 = 46875 units
Solution 6a:
Nos of balls to be sold to earn target income = (Fixed cost +
Target profit) / contribution margin per unit
= ($750,000 + $225,000) / $16 = 60938 units
Solution 6b:
Problem 5-20 CVP Applications: Break-Even Analysis; Cost Structure; Target Sales [LO5-1, LO5-3, LO5- 4, LO5-5, LO5-6,...
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All help is appreciated. Thanks for your time! Problem 5-20 CVP Applications: Break-Even Analysis; Cost Structure: Target Sales (LO5-1, LO5-3, L05-4, LO5-5, LO5-6, LO5-8] 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 $15.00 per ball of which 60 direct labor cost Last year, the company sold 42,000 of these balls, with the...
please slove all the questions. thank you! Seved Help Problem 5-20 CVP Applications: Break-Even Analysis; Cost Structure; Target Sales (LO5-1, LO5-3, LOS- 4, LO5-5, LO5-6, LO5-8) 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 $15.00 per ball, of which 60% is direct labor cost Last year, the company sold 50,000 of these...
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