# If the new plant is built, what would be the company’s new CM ratio and new brea

Sigchi4life
Category:
Accounting
Price: \$5 USD

Question description

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

Studypool has helped 1,244,100 students

1826 tutors are online

### Related Accounting questions

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors