question archive Refer to the original data
Refer to the original data
Subject:AccountingPrice: Bought3
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 30%, but it would cause fixed expenses per year to increase by 99%. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls?
Original Data:
Northwood Company manufactures basketballs. The company has a ball that sells for $35. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $24.50 per ball, of which 70% is direct labor cost.
| Last year, the company sold 57,000 of these balls, with the following results: |
Sales (57,000 balls) $ 1,995,000
Variable expenses 1,396,500
Contribution margin 598,500
Fixed expenses 493,500
Net operating income $ 105,000
