Northwood Company manufactures a basketball selling for $25 per unit in a small plant heavily relying on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost.
Last year, the company sold 32,250 balls, with the following results:
Sales (32,250 balls)$ 806,250Variable expenses483,750Contribution margin322,500Fixed expenses222,600Net operating income$ 99,900
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 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls?