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 |
-The Libanes stion lechno. MUB Home Page Cape Software Dow.. UBLeams Imported from Ch 6 HOMEWORK...
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...
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...
Check my work Sales (58,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,450,000 870,000 580,000 374,000 $ 206,000 6.25 points eBook Print References Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place...
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....
question 2 Last year, the company sold 40,000 of these balls, with the following results: Sales (40,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $1,000,000 600,000 400,000 265,000 $ 135,000 Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per...
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 800,000 480,000 320,000 211,000 109,000 $ Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball....
Last year, the company sold 46,000 of these balls, with the following results: Sales (46,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,150,000 690,000 460,000 318,000 $ 142,000 Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, Jind (b) the degree of operating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per 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 $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 44,000 of these balls, with the following results: Sales (44,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,100,000 660,000 440,000 317,000 $ 123,000 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 dir labor cost Last year, the company sold 46,000 of these balls, with the following results: Sales (46,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,150,000 690,000 460,000 318,000 $ 142,000 Required: 1....
NOTE all are part of question 3 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. 35 Last year, the company sold 56,000 of these balls, with the following results: points (8 00:22:23 Sales (56,000 balls) Variable expenses Contribution margin Fixed expenses Net...