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 = $211,000 / $10.00
Breakeven Point in balls = 21,100
Degree of Operating Leverage = Contribution Margin / Net
Operating Income
Degree of Operating Leverage = $320,000 / $109,000
Degree of Operating Leverage = 2.94
Answer 2.
Selling Price per unit = $25.00
Variable Cost per unit = $15.00 + $3.00
Variable Cost per unit = $18.00
Fixed Expenses = $211,000
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 = $211,000 / $7.00
Breakeven Point in units = 30,143
Answer 3.
Contribution Margin per unit = $7.00
Fixed Expenses = $211,000
Target Profit = $109,000
Required Sales in units = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Sales in units = ($211,000 + $109,000) / $7.00
Required Sales in units = 45,714
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 = $211,000 * 2
Fixed Expenses = $422,000
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 = $422,000 / $16.00
Breakeven Point in balls = 26,375
Answer 6-a.
Contribution Margin per unit = $16.00
Fixed Expenses = $422,000
Target Profit = $109,000
Required Sales in units = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Sales in units = ($422,000 + $109,000) / $16.00
Required Sales in units = 33,188
Answer 6-b.
Degree of Operating Leverage = Contribution Margin / Net
Operating Income
Degree of Operating Leverage = $512,000 / $90,000
Degree of Operating Leverage = 5.69
northwood company manufactures basketballs Northwood Company manufactures basketballs. The company has a ball that sells for...
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) $ 800,000 Variable expenses 480,000 Contribution margin 320,000 Fixed expenses 211,000 Net operating income $ 109,000 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 32,000 of these balls, with the following results: Sales (32,000 balls) $ 800,000 Variable expenses 480,000 Contribution margin 320,000 Fixed expenses 211,000 Net operating income $ 109,000 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 32,000 of these balls, with the following results: Sales (32,000 balls) $ 800,000 Variable expenses 480,000 Contribution margin 320,000 Fixed expenses 211,000 Net operating income $ 109,000 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 32,000 of these balls, with the following results: $ Sales (32,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income 350,000 510.000 340,000 218,000 122,000 $ 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) $ 1,000,000 Variable expenses 600,000 Contribution margin 400,000 Fixed expenses 265,000 Net operating income $ 135,000 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 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 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. 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 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 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....