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Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured i
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Complete this question by entering your answers in the tabs below. Req 1 Req 2 Reg 3 Req 4 Req5 Req 6A Req 6B Refer to the or
Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req3 Req 4 Req 5 Reg 6A Req 6B If the new plan
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Answer #1
Ques 1
i. Selling price $                                        25.00 100.00%
Variable expenses $                                        15.00 60.00%
Contribution margin $                                        10.00 40.00%
II.
Breakeven in units = Fixed costs / contribution per unit
breakeven=321000/10=                                          32,100 units
iii
degree of operating levarage = contriution margin /net operating income
DOL=520000/199000=                                               2.61
b.
i. Selling price $                                        25.00 100.00%
Variable expenses $                                        18.00 72.00%
Contribution margin $                                           7.00 28.00%
Ques 2
Breakeven in units = Fixed costs / contribution per unit
breakeven=321000/7=                                          45,857 units
Ques 3
Target sales = target profit + fixed expenses / contribution margin p.u
target sales(units)=(212000+199000)/7
target sales=                                          74,286 balls
ques 4
The contribution margin ratio last year was 40%. If we let P equal the new selling price, then
P = $18 + 0.40 P
0.60 P = $18
P=$18/0.60
P=$30
ques 5
Selling price $                                        25.00 100%
Variable expenses $                                           9.00 36%
Contribution margin $                                        16.00 64%
*$15 – ($15 × 40%) = $9
double fixed expenses = 2 * 321000= 642000
Breakeven in units = Fixed costs / contribution per unit
breakeven=642000/16=                                          40,125 units
ques 6
Target sales = target profit + fixed expenses / contribution margin p.u
target sales(units)=(199000+642000)/16
target sales=                                          52,563 balls
part b
Selling price $                          1,300,000.00
Variable expenses $                              468,000.00
Contribution margin $                              832,000.00
fixed expenses $                              642,000.00
net operating income $                              190,000.00
degree of operating levarage = contribution margin /net operating income
DOL=832000/190000=                                               4.38
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