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 30,000 of these balls, with the following results: sales (30,000 balls) $ 750,000 variable expenses 450,000 contribution margin 300,000 fixed expenses 210,000 net operating income $ 90,000 compute the cm ratio and the break-even point in balls.

Contribution margin ratio= 0.4

Break-even point (units)= 21000 units

Explanation:

Giving the following information:

The company has a ball that sells for $25.

Variable expenses are high, totaling $15.00

Last year, the company sold 30,000 of these balls, with the following results:

Sales (30,000 balls) $ 750,000

Variable expenses 450,000

Contribution margin 300,000

Fixed expenses 210,000

Net operating income $ 90,000

Contribution margin ratio= [(selling price - unitary variable cost )/selling price]

Contribution margin ratio= [(25-15)/25]= 0.4

Break-even point (units)= fixed cost/contribution margin= 210000/10= 21000 units

answer: kevoto

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