Question

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 36,000 of these balls, with the following results:

Sales (36,000 balls) $ 900,000
Variable expenses 540,000
Contribution margin 360,000
Fixed expenses 263,000
Net operating income $ 97,000

Required:

1. Compute the CM ratio and the break-even point in balls.
2. Compute the the degree of operating leverage at last year.

Answer 1

Answer: 15$ per ball and 60% is direct label cost! Ur answer’s are 15$ and 60% dlc!

Explanation:

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.