Solution 1:
Contribution margin ratio = Contribution margin / sales = $380,000 / $950,000 = 40%
Contribution margin per unit = $25 - $15 = $10 per unit
Breakeven sales units = Fixed cost / contribution margin per unit = $264,000 / 10 = 26400 units
Degree of operating leverage = Contribution margin / Net operating income = $380,000 / $116,000 = 3.28
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 = $264,000 / $7 = 37714 units
Solution 3:
Nos of balls to be sold to earn target income = (Fixed cost + Target profit) / contribution margin per unit
= ($264,000 + $116,000) / $7 = 54286 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 = $264,000*2 = $528,000
New CM ratio = $16/$25 = 64%
New breakeven point = $528,000/ $16 = 33000 units
Solution 6a:
Nos of balls to be sold to earn target income = (Fixed cost + Target profit) / contribution margin per unit
= ($528,000 + $116,000) / $16 = 40250 units
Solution 6b:
Northwood Company |
|
Contribution margin income statement |
|
Particulars |
Amount |
Sales (38000*$25) |
$950,000.00 |
Variable cost (38000*$9) |
$342,000.00 |
Contribution margin |
$608,000.00 |
Fixed expenses |
$528,000.00 |
Net Operating income |
$80,000.00 |
Degree of operating leverage (Contribution / Net Operating income) |
7.60 |
Problem 5-20 CVP Applications: Break-Even Analysis; Cost Structure; Target Sales (LO5-1, LO5-3, LO5- 4, LO5-5, LO5-6,...
Problem 5-20 CVP Applications: Break-Even Analysis; Cost Structure; Target Sales [LO5-1, LO5-3, LO5- 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 60,000 of these balls, with the following results: Sales (60,000 balls) Variable...
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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...
Problem 6-20 CVP Applications: Break-Even Analysis; Cost Structure; Target Sales [LO6-1, LO6-3, LO6- 4, LO6-5, LO6-6, LO6-8] points 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. eBook Last year, the company sold 58,000 of these balls, with the following results: Print References...
Problem 6-20 CVP Applications: Break-Even Analysis; Cost Structure; Target Sales (LO6-1, LO6-3, LOG- 4, LO6-5, LO6-6, LO6-8] 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 direc labor cost. Last year, the company sold 50,000 of these balls, with the following results: Sales (50,000 balls) Variable...
Help 10 Problem 6-20 CVP Applications: Break-Even Analysis; Cost Structure; Target Sales (LO6-1, LO6-3, LO6 4. L06-5, L06-6, LO6-8) 0.83 points 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...
Helps FIUNITI D'AVUV APPILLUNS, DICON"CVI Analysis, LUL SUULLIE, Taiyel IES LUDI, LUU'S, LUD 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 38,000 of these balls, with the following results: $ Sales (38,000 balla)...
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