1. Memofax Inc produces memory enhancement kits for fax machines. Sales have been erratic with some months showing a profit and some months showing a loss. The company's income statement for the most recent month is given below: Sales (13,500 Units at $20 per unit). $270,000 Less: variable expenses.. 189,000 Contribution Margin. 81,000 Less: fixed expenses.. 90.000 Net Operating loss.... S (9,000) Required: [7] 1. Compute the company's CM ratio and its break-even point in both units and dollars using equation method. 2. The sales manager feels that an $8,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $70,000 increase in monthly sales. If the sales manager is right, what will be the increase on the company's monthly net operating income or loss? 3. The President is convinced that a 10% reduction in the selling price, combined with an increase of $35,000 in the monthly advertising budget, will cause unit sales to double. What will the new income statement look like if these changes are adopted? 4. Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.60 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $4,500? What will be the new break-even point in dollar sales? 5. Prepare the CVP Graph showing cost & revenue data from a zero level of activity up to 20000 units sold each year. Clearly indicate the Breakeven point and margin of safety on the Graph