question archive FIFA Company manufactures footballs which sell for $25 each
FIFA Company manufactures footballs which sell for $25 each
Subject:BusinessPrice: Bought3
FIFA Company manufactures footballs which sell for $25 each. At present. the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totalling $15 per ball, of which 60% is direct labor cost. Last year, the company sold 30,000 of these balls, with the following results: Sales (30.000 balls) Variable expenses Contribution margin Fixed expenses Net operating income $750,000 450,000 300,000 210,000 $90,000 Required (round your computation to two decimal places, where applicable): (a) What is the product's contribution margin (CM) ratio? Use the CM ratio to determine the breakeven point in dollar sales. (4 marks) (b) What is the contribution margin per unit? Use the CM per unit to determine the breakeven point in balls. (4 marks) (c) Compute the margin of safety percentage and the degree of operating leverage at last year's sales level. (4 marks) (d) Use the degree of operating leverage you calculated in (c) to determine the estimated percentage increase in net operating income that would result from a 5% increase in unit sales? (2 marks)
