CM ratio = CM/Sales
= 320,000/800,000
=40%
Break point in Balls = Fixed costs/CM per unit
= 214,000/10
= 21,400 units
Degree of operating leverage = CM/Operating income
= 320,000/106,000
=3.01887
2.CM Ratio = (25-15-3)/25 = 28%
Break even point = 214,000/7 = 30,571.43 balls
3.Desired operating income = $106,000
Add: Fixed costs = 214,000
Desired contribution margin = $320,000
Number of balls = 320,000/7 = 45,714.29 balls
4.Selling price = Variable cost/Variable cost ratio
= 18/0.6 = $30
5.CM Ratio = (25-15*0.6)/25 = 64%
Break even point = 214,000*2/16
= 26,750 balls
6a. Balls to be sold = (106,000+428,000)/16
= 33,375 balls
b.Income Statement
Sales 31,000*25 |
775,000 |
Variable expenses 31,000*9 |
279000 |
Contribution Margin |
496000 |
Fixed costs |
428000 |
Operating income |
68000 |
DOL = 496,000/68,000
= 7.2941
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 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....
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 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 48,000 of these balls, with the following results: Sales (48,000 balls) $1,200,000 Variable Expenses 720,000 Contribution Margin 480,000 Fixed Expenses 319,000 Net Operating Income 161,000 Required: 1. Compute (a)...
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) Variable expenses Contribution margin Fixed expenses Net operating income $1,550,000 930,000 620,000 426,000 $ 194,000 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 relles 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 36,000 of these balls, with the following results: Sales (36,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income 900,000 540,000 360,000 263,000 $ 97,000 Required: 1. Compute...