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

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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 

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