Homework Answers
Solution 1:
Contribution margin ratio = Contribution margin / sales = $756,000 / $1890,000 = 40%
Contribution margin per unit = $35 - $21 = $14 per unit
Breakeven sales units = Fixed cost / contribution margin per unit = $630,000 / 14 = 45000 units
Degree of operating leverage = Contribution margin / Net operating income = $756,000 / $126,000 = 6.00
Solution 2:
New variable cost per unit = $21 + $2.80 = $23.80 per ball
new contribution margin per unit = $35 - $23.80 = $11.20 per unit
New contribution margin ratio = $11.20 / $35 =32%
New breakeven point in balls = $630,000 / $11.20 = 56250 units
Solution 3:
Nos of balls to be sold to earn target income = (Fixed cost + Target profit) / contribution margin per unit
= ($630,000 + $126,000) / $11.20= 67500 units
Solution 4:
Variable cost per unit = $23.80 per unit
Required contribution margin ratio = 40%
required variable cost ratio = 60%
New selling price per unit = $23.80 / 60% = $39.67 per unit
Solution 5:
New variable cost per unit = $21 * 60% = $12.60 per unit
New contribution margin per unit = 35- $12.60 = $22.40 per unit
New fixed costs = $630,000*189% = $1,190,700
New CM ratio = $22.4/$35 = 64%
New breakeven point = $1,190,700/ $22.40 = 53,156 units
Solution 6a:
Nos of balls to be sold to earn target income = (Fixed cost + Target profit) / contribution margin per unit
= ($1190,700 + $126,000) / $22.40 = 58781 units
Solution 6b:
| Northwood company | |
| Contribution margin income statement | |
| Particulars | Amount |
| Sales (54000*$35) | 1890000 |
| Variable cost (54000*$12.60) | 680400 |
| Contribution margin | 1209600 |
| Fixed expenses | 1190700 |
| Net Operating income | 18900 |
| Degree of operating leverage (Contribution / Net Operating income) | 64.00 |
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Northwood Company manufactures basketballs. The company has a ball that sells for $42. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $25.20 per ball, of which 60% is direct labor cost. Last year, the company sold 47,000 of these balls, with the following results: Sales (47,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,974,000 1,184,400 789,600 588,000 $ 201,600 Required: 1....
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 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....
northwood company manufactures basketballs Northwood Company manufactures basketballs. The company has a ball that sells for...
northwood company manufactures basketballs
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 32,000 of these balls, with the following results: $ Sales (32,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income 800.000 480,000 320,000 211,000...
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 62,000 of these balls, with the following results: Sales (62,000 balls) $ 1,550,000 Variable expenses 930,000 Contribution margin 620,000 Fixed expenses 426,000 Net operating income $ 194,000 Required: 1....
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 42,000 of these balls, with the following results: Sales (42,000 balls) $ 1,050,000 Variable expenses 630,000 Contribution margin 420,000 Fixed expenses 266,000 Net operating income $ 154,000 Required: 1....
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 30,000 of these balls, with the following results: Sales (30,000 balls) $ 750,000 Variable expenses 450,000 Contribution margin 300,000 Fixed expenses 210,000 Net operating income $ 90,000 Required: 1....
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 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...
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...
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 58,000 of these balls, with the following results: Sales (58,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,450,000 870,000 580,000 374,000 $ 206,000 Required: 1....
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 34,000 of these balls, with the following results: $ Sales (34.Bee balls) Variable expenses Contribution margin Fixed expenses Net operating income 350,Bee 518, eee 340, see 212.000 128, $...
Northwood Company manufactures basketballs. The company has a ball that sells for $42. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $25.20 per ball, of which 60% is direct labor cost. Last year, the company sold 47,000 of these balls, with the following results: Sales (47,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,974,000 1,184,400 789,600 588,000 $ 201,600 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....
northwood company manufactures basketballs
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 32,000 of these balls, with the following results: $ Sales (32,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income 800.000 480,000 320,000 211,000...
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 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 58,000 of these balls, with the following results: Sales (58,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,450,000 870,000 580,000 374,000 $ 206,000 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 34,000 of these balls, with the following results: $ Sales (34.Bee balls) Variable expenses Contribution margin Fixed expenses Net operating income 350,Bee 518, eee 340, see 212.000 128, $...
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