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northwood company manufactures basketballs

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured i
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Answer #1

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.

Income Statement Sales (32,000 * $25.00) Variable expenses (32,000 * $9.00) Contribution margin Fixed expenses Net operating

Degree of Operating Leverage = Contribution Margin / Net Operating Income
Degree of Operating Leverage = $512,000 / $90,000
Degree of Operating Leverage = 5.69

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