I have some incorrect answers already filled into the blanks. Please ignore thes

Question

I have some incorrect answers already filled into the blanks. Please ignore these 4. value: 5.00 points Northwood Company manufactures basketballs. The company has a ball that sells for $30. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $18.00 per ball, of which 60% is direct labor cost Last year, the company sold 51,000 of these balls, with the following results: Sales (51,000 balls) Variable expenses $1,530,000 918,000 Contribution margin Fixed expenses 612.000 492,000 Net operating income S 120,000 Required: 1-a Compute the CM ratio and the break-even point in balls. (Do not round intermediate calculations.) CM Ratio 40% Unit sales to break even 41,000 balls 1-b. Compute the the degree of operating leverage at last year's sales level (Round your answer to 2 decimal places.) 5.10

Explanation / Answer

Contribution Margin (CM): It is the difference between the companies sales and variable expenses. It is used by the entity to caclulate the earnings available to pay the fixed expenses.

revenue (Sales)=1,530,000

Variable expenses=918

Contribution Margin=612

CM ratio=sales-variable expenses/sales

1,530000-918/1530000=0.9994

CM per unit=83.33

Sales per unit=30

CM Margin ratio=CM per Unit/Sales per Unit

5) New CM ratio: 29.9892

New break even=29.51

CM Margin Ratio: 83.33/30=2.77

Unit sale to breakeven is $16

Degree of Operating Leverage is 1.000

2) New CM ratio if the variable cost increase by $2.40 is 27.582

Break even is 17.83

The number of balls that have to be sold is 40300

6) 18000 balls have to be sold

Net operating leverage is 65

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