Problem 5 - 20 CVP Applications : Break- Even Analysis; Cost Structure; Target Sales [LO5 - 1, LO5- 3, LO5 - 4 , LO5 - 5, LO5 - 6, 105 - 8] 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 dire 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 64, 000 of these balls , with the following results ." Sales 164 , 000 balls ! $ 1 , 600 , 000 Variable EXPENSES 950, 000 Contribution margin $40 , 000 Fixed EXPENSES 127, 000 Net operating income 5 213, 000CM Ratio Unit sales to break even balls Degree of operating leverage