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 = $372,000 / $10.00
Breakeven Point in balls = 37,200
Degree of Operating Leverage = Contribution Margin / Net
Operating Income
Degree of Operating Leverage = $540,000 / $168,000
Degree of Operating Leverage = 3.21
Answer 2.
Selling Price per unit = $25.00
Variable Cost per unit = $15.00 + $3.00
Variable Cost per unit = $18.00
Fixed Expenses = $372,000
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 = $372,000 / $7.00
Breakeven Point in units = 53,143
Answer 3.
Contribution Margin per unit = $7.00
Fixed Expenses = $372,000
Target Profit = $168,000
Required Sales in units = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Sales in units = ($372,000 + $168,000) / $7.00
Required Sales in units = 77,143
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 = $372,000 * 2
Fixed Expenses = $744,000
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 = $744,000 / $16.00
Breakeven Point in balls = 46,500
Answer 6-a.
Contribution Margin per unit = $16.00
Fixed Expenses = $744,000
Target Profit = $168,000
Required Sales in units = (Fixed Expenses + Target Profit) /
Contribution Margin per unit
Required Sales in units = ($744,000 + $168,000) / $16.00
Required Sales in units = 57,000
Answer 6-b.
Degree of Operating Leverage = Contribution Margin / Net
Operating Income
Degree of Operating Leverage = $864,000 / $120,000
Degree of Operating Leverage = 7.20
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 54,000 of these
balls, with the following results:
Required:
1. Compute (a) last year's CM ratio and the break-even point in
balls, and (b) the degree of operating leverage...
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 54,000 of these balls, with the following results: Sales (54, eee balls) Variable expenses Contribution margin Fixed expenses Net operating income 549.eae Required: 1. Compute(a) last year's CM ratio...
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 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 58,000 of these balls, with the following results: Sales (58,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $ 1,450,000 870,000 580,000 374,000 $ 206,000 Required: 1....