What selling price per ball must charge next year

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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 52,000 of these balls, with the following results:

Sales (52,000 balls) $ 1,300,000
Variable expenses 780,000
Contribution margin 520,000
Fixed expenses 321,000
Net operating income $ 199,000

Problem 1: The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year, what selling price per ball must it charge next year to cover the increased labor costs?

Reference no: EM133003918

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