need answers to part 1,5,6A, and 6B
Solution 1:
Contribution margin ratio = Contribution margin / sales = $300,000 / $750,000 = 40%
Contribution margin per unit = $25 - $15 = $10 per unit
Breakeven sales units = Fixed cost / contribution margin per unit = $210,000 / 10 = 21000 units
Degree of operating leverage = Contribution margin / Net operating income = $300,000 / $90,000 = 3.33
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 = $210,000 / $7 = 30000 units
Solution 3:
Nos of balls to be sold to earn target income = (Fixed cost + Target profit) / contribution margin per unit
= ($210,000 + $90,000) / $7 = 42857 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 = $210,000*2 = $420,000
New CM ratio = $16/$25 = 64%
New breakeven point = $420,000/ $16 = 26250 units
Solution 6a:
Nos of balls to be sold to earn target income = (Fixed cost + Target profit) / contribution margin per unit
= ($420,000 + $90,000) / $16 = 31875 units
Solution 6b:
Northwood Company | |
Contribution margin income statement | |
Particulars | Amount |
Sales (30000*$25) | $750,000.00 |
Variable cost (30000*$9) | $270,000.00 |
Contribution margin | $480,000.00 |
Fixed expenses | $420,000.00 |
Net Operating income | $60,000.00 |
Degree of operating leverage (Contribution / Net Operating income) | 8.00 |
need answers to part 1,5,6A, and 6B Northwood Company manufactures basketballs. The company has a ball...
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 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....
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 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 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 ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15 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 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: 2....
#5 & #6 Check my wo 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...
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....