10 Problem 5-22 CVP Applications: Contribution Margin Ratio: Break-Even Analysis: Cost Structure [L05-1, LO5-3, L05-4, L05-5, L05-6) points Due to erratic sales of its sole product-a high capacity battery for laptop computers-PEM, Inc., has been expenencing financial dificulty for some time. The company's contribution format Income statement for the most recent month is given below. Sales (19,500 units 530 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $585,000 409,500 175,500 180,000 $ (4,500) Required: 1 Compute the company's CM ratio and its break-even point in unt sales and dollar sales 2. The president believes that a 516,000 increase in the monthly advertising budget combined with an intensified effort by the sales staff will result in an $80.000 increase in monthly sales. If the president is right, what will be the increase (decrease in the company's monthly net operating income? 3. Refer to the orginal data. The sales manager is convinced that a 10 Reg 58 n in the selling price, combined with an increase of $60.000 in the monthly advertising budget, will double unit sales. If th nager is nght, what will be the revised net operating Income poss) 4. Refer to the original data. The Marketing Department think that a fancy hew package for the laptop computer battery would grow sales. The new package would increase packaging costs by 75 cents per unit Assuming no other changes, how many units would have to be sold each month to attain a target profit of $9.750? 5. Refer to the original data by automating, the company could reduce variable expenses by $5 per unit. However, fixed expenses would increase by $72,000 each month a. Compute the new CM ratio and the new break-even point in unt sales and dollar sales b. Acume that the company expects to sell 26.000 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are show data on a per unit and percentage basis, as well as in total, for each alternative) c. Would you recommend that the company automate its own Check my work mode: This shows what is correct or Incorrect for the work you have complete 10 1. LUR LE CANELLS Sen OUUU IS ELHULPepare WULUH TUDI TUTTO IL Statement, I assuming that operations are not automated and one assuming that they are (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 26,000)? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. points Reg 1 Req2 Reg 3 Reg 4 Reg SA Reg 58 Reg 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $72,000 each month. Assume that the company expects to sell 26,000 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) Show less Total Sales > PEM, Inc. Contribution Income Statement Not Automated Per Unit Reg 5B $ 780,000 $ 30 100 % > 100.000 494,000 19 8 3 545,000 286,000 $ 11 37 234.000 252,000 180,000 34,000 $ 54000 Automated Per Unit S 30 21 S 100 % 70 % OOOO Variable expenses Contribution margin Foed expenses Net operating income 30 % ( ReqSA Reg 5C > CHOS SET-AO Check my work mode: This shows what is correct or Incorrect for the work you have completed 10 RUS 4. Refer to the onginal data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by 75 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $9,750? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $72,000 each month a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales b. Assume that the company expects to sell 26,000 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assume that they are (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its of Reg SA Assuming that the company expects to sell 26,000)? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req Reg 2 Reg 3 Reg4 ReqSA Regs RG SC Refer to the original data. By automating, the company could reduce variable expenses by $5 per unit. However, fixed expenses would increase by $72,000 each month. Compute the new CM ratio and the new break even point in unit sales and dollar sales. (Do not round Intermediate calculations. Round "CM ratio to the nearest whole percentage (.e., 0.234 should be entered as "23") and other answers to the nearest whole number) Show less 30 CM 800 Break even point in units Break-even point in dollar sales 22.09 687,210