Spelling Basketball Company manufactures basketballs that retail for $ 15 each. The capacity of the current...

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Spelling Basketball Company manufactures basketballs that retail for $ 15 each. The capacity of the current company allows them to only manufacture 1,000,000 basketballs every year, and they are able to sell 500,000 given the high demand for their products. The cost of each basketball is shown below: Direct material - $ 2.50 Direct labor - 1.50 Variable overhead - 0.50 Variable selling expenses - 0.50 Total fixed overhead - $ 2,500,000 1. Determine the break-even point in number of basketballs 2. Determine the company's margin of safety in sales units and sales dollars 3. Compute the company's degree of operating leverage. If sales increase by 25%, by what percentage would pre-tax income increase 4. If the company wants to earn 800,000 after tax and is subject to a 30% tax rate, how many basketballs must be sold? 5. Spelling Basketball Company has received an offer from the NBA to provide a one-time sale of 50,000 balls at $ 8.50 each to the various basketball teams. While the cost of manufacturing would not change, the variable cost of the additional units would increase by $ 0.20 for shipping, and the fixed cost would increase by $5,000 in order to make templates for the team logos. Based solely on financial information, should the company accept this offer? Use quantitative Information to explain your recommendation Spelling Basketball Company manufactures basketballs that retail for $ 15 each. The capacity of the current company allows them to only manufacture 1,000,000 basketballs every year, and they are able to sell 500,000 given the high demand for their products. The cost of each basketball is shown below: Direct material - $ 2.50 Direct labor - 1.50 Variable overhead - 0.50 Variable selling expenses - 0.50 Total fixed overhead - $ 2,500,000 1. Determine the break-even point in number of basketballs 2. Determine the company's margin of safety in sales units and sales dollars 3. Compute the company's degree of operating leverage. If sales increase by 25%, by what percentage would pre-tax income increase 4. If the company wants to earn 800,000 after tax and is subject to a 30% tax rate, how many basketballs must be sold? 5. Spelling Basketball Company has received an offer from the NBA to provide a one-time sale of 50,000 balls at $ 8.50 each to the various basketball teams. While the cost of manufacturing would not change, the variable cost of the additional units would increase by $ 0.20 for shipping, and the fixed cost would increase by $5,000 in order to make templates for the team logos. Based solely on financial information, should the company accept this offer? Use quantitative Information to explain your recommendation

Answer rating: 100% (QA)

Answer1 1500 Selling Price per unit Less Variable Cost per unit Dir... View the full answer