Referto the original data. The company is discussing the construction of anew, automated manufacturing plant. The new plant would slash variableexpenses per ball by 30%, but it would cause fixed expenses per year toincrease by 99%. If the new plant is built, what would be the company’snew CM ratio and new break-even point in balls?Original Data:NorthwoodCompany manufactures basketballs. The company has a ball that sells for$35. At present, the ball is manufactured in a small plant that reliesheavily 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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