Answer 1.
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $25.00 - $15.00
Contribution Margin per unit = $10.00
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $10.00 / $25.00
Contribution Margin Ratio = 40%
Breakeven Point in balls = Fixed Expenses / Contribution Margin
per unit
Breakeven Point in balls = $317,000 / $10.00
Breakeven Point in balls = 31,700
Degree of Operating Leverage = Contribution Margin / Net
Operating Income
Degree of Operating Leverage = $440,000 / $123,000
Degree of Operating Leverage = 3.58
Answer 2.
Selling Price per unit = $25.00
Variable Cost per unit = $15.00 + $3.00
Variable Cost per unit = $18.00
Fixed Expenses = $317,000
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $25.00 - $18.00
Contribution Margin per unit = $7.00
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $7.00 / $25.00
Contribution Margin Ratio = 28%
Breakeven Point in units = Fixed Expenses / Contribution Margin
per unit
Breakeven Point in units = $317,000 / $7.00
Breakeven Point in units = 45,286
Answer 3.
Contribution Margin per unit = $7.00
Fixed Expenses = $317,000
Target Profit = $123,000
Required Sales in units = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Sales in units = ($317,000 + $123,000) / $7.00
Required Sales in units = 62,857
Answer 4.
Variable Cost per unit = $18.00
Contribution Margin Ratio = 40%
Contribution Margin Ratio = (Selling Price per unit - Variable
Cost per unit) / Selling Price per unit
0.40 = (Selling Price per unit - $18.00) / Selling Price per
unit
0.40 * Selling Price per unit = Selling Price per unit -
$18.00
0.60 * Selling Price per unit = $18.00
Selling Price per unit = $30.00
Answer 5.
Selling Price per unit = $25.00
Variable Cost per unit = $15.00 - 40% * $15.00
Variable Cost per unit = $9.00
Fixed Expenses = $317,000 * 2
Fixed Expenses = $634,000
Contribution Margin per unit = Selling Price per unit - Variable
Cost per unit
Contribution Margin per unit = $25.00 - $9.00
Contribution Margin per unit = $16.00
Contribution Margin Ratio = Contribution Margin per unit /
Selling Price per unit
Contribution Margin Ratio = $16.00 / $25.00
Contribution Margin Ratio = 64%
Breakeven Point in balls = Fixed Expenses / Contribution Margin
per unit
Breakeven Point in balls = $634,000 / $16.00
Breakeven Point in balls = 39,625
Answer 6-a.
Contribution Margin per unit = $16.00
Fixed Expenses = $634,000
Target Profit = $123,000
Required Sales in units = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Sales in units = ($634,000 + $123,000) / $16.00
Required Sales in units = 47,313
Answer 6-b.
Degree of Operating Leverage = Contribution Margin / Net
Operating Income
Degree of Operating Leverage = $704,000 / $70,000
Degree of Operating Leverage = 10.06
Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the...
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 44,000 of these balls, with the following results: Sales (44,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,100,000 660,000 440,000 317,000 $ 123,000 Required: 1....
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 44,000 of these balls, with the following results: Sales (44,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,100,000 660,000 440,000 317,000 $ 123,000 Required: 1....
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 30,000 of these balls, with the following results: $ Sales (30,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income 750,000 450.000 300,000 210,000 90,000 Required: 1. Compute...
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 52,000 of these balls, with the following results: Sales (52,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,300,000 780,000 520,000 321,000 $ 199,000 Required: 1....
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 dir labor cost Last year, the company sold 46,000 of these balls, with the following results: Sales (46,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,150,000 690,000 460,000 318,000 $ 142,000 Required: 1....
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 40,000 of these balls, with the following results: Sales (40,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $1,000,000 600,000 400.000 265,000 $ 135,000 Required: 1. Compute...
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 44,000 of these balls, with the following results: Sales (44,000 balls) $ 1,100,000 Variable expenses 660,000 Contribution margin 440,000 Fixed expenses 317,000 Net operating income $ 123,000 Required: Compute...
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 36,000 of these balls, with the following results: $ Sales (36,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income 900,000 540,000 360,000 263,000 97,000 Required: 1. Compute...
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 direc labor cost. Last year, the company sold 44,000 of these balls, with the following results: Sales (44, eee balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,180,000 660,000 448,000 317,000 123,eee Required: 1....
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 34,000 of these balls, with the following results: $ Sales (34,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income 850,000 510,000 340,000 212,000 128,000 $ Required: 1....