Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls? (Round "CM Ratio" to 2 decimal places and "Unit sales to break even" to the nearest whole unit.)

Question Completion with original data:

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 38,000 of these balls, with the following results:

Sales (38,000 balls)      $950, 000

Variable expenses          570, 000

Contribution margin       380, 000

Fixed expenses              264, 000

Net operating income  $ 116, 000

Northwood Company

New Contribution Margin Ratio:

0.64

New Break-even Point in balls:

33,000 balls

Explanation:

a) Data and Calculations:

Selling price = $25

Variable manufacturing cost = $15 per ball

Direct labor = 60% of $15 = $9

Other variable cost = $6 ($15 - $9)

Reduction of Variable manufacturing cost by 40% = $9 ($15 * 60%)

New fixed expenses = $528,000 ($264, 000 * 2)

Income Statement        Value           Per unit

Sales (38,000 balls)      $950, 000   $25

Variable expenses          342, 000     $9

Contribution margin       608, 000    $16

Fixed expenses              528, 000

Net operating income   $ 80, 000

Contribution margin ratio = $16/$25 = 0.64

Break-even point in unit sales = Fixed expenses/Contribution per margin

= $528,000/$16 = 33,000 balls

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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