3 Problem 5-22 (Algo) CVP Applications: Contribution Margin Ratio: Break-Even Analysis; Cost Structure [LO5-1, LO5-3, LO5-4, LO5-5, LO5-6) Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc, has been experiencing financial difficulty for some time. The company's contribution format Income statement for the most recent month is given below Sales (13,000 units $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 390,000 234,000 156,000 174,000 $ (18,000) Neance Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales 2. The president believes that a $6,900 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $88,000 per month. If the president is right, what will be the increase (decrease in the company's monthly net operating income? 3 Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $34,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating Income floss)? 4 Refer to the original 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 $0.80 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,500? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $54,000 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 20,700 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, os well as in total, for each alternative) Would you recommend that the company automate its operations (Assuming that the company expects to sell 20700 unitsy? to be sold each month to attain a target profit of $4,500? 5. Refer to the original data By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $54,000 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 20,700 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 basks, as well as in total, for each alternative.) Would you recommend that the company automate its operations (Assuming that the company expects to sell 20700 units)? Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Reg 3 Reg 4 Req 5A Reg 58 Req SC Compute the company's CM ratio and its break-even point in unit sales and dollar sales. (Do not round intermediate calculations. Round "CM ratio to the nearest whole percentage (ie., 0.234 should be entered as "23"). 601% CM ratio Break-even point in unit sales Break even point in dollar sales 14,5001 Reg1 Req 2 > 3 to be sold each month to attain a target profit of $1.500? 5. Refer to the original data By automating, the company could reduce variable expenses by $3 per unit. However, foxed expenses would increase by $54,000 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 20,700 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 operations (Assuming that the company expects to sell 20700 units)? ok ces Complete this question by entering your answers in the tabs below. Reg 1 Req2R Req3 Req4 ReqSA Reg 58 Req 5C The president believes that a $6,900 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $88,000 per month. If the president is right, what will be the increase (decrease in the company's monthly net operating income? (Do not round intermediate calculations.) by Income (loss)? 4. Refer to the original 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 $0.80 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,500? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expemes would increase by $54,000 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 20.700 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, os well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20700 units Book mences Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Reg 4 Reg 5A Reg 5B Reg 5C Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $34,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? (Losses should be entered as a negative value.) Revised net operating income (loss) 5. Refer to the original would increase by $54.000 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 20.700 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 operations (Assuming that the company expects to sell 20700 units)? Book Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Req SA Reg 58 Reg SC Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, foxed Pedu expenses would increase by $54,000 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 (ie., 0.234 should be entered as "23") and other answers to the nearest whole number.) Show less CM ratio Break-even point in unit sales Break even point in dollar sales ( Req4 Reg 58 > widthey are show data on a per unit and percentage basis, as well as in total for each alternative) Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,700 unitsy? Book ference Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 ReqSA 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 $54,000 each month. Assume that the company expects to sell 20,700 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 bases, as well as in total, for each alternative.) (Do not round your intermediate calculations. Round your percentage answers to the nearest whole number) Show less PEM, Inc. Contribution Income Statement Not Automated Total Per Unit % 96 Automated Total Per Unit % 0 $ 0 0% 0 $ 0 0 % 0 $ 0 4 Refer to the original 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 $0.80 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,500? 5 Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $54.000 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 20,700 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 operations (Assuming that the company expects to sell 20700 units? Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Req3 Reg 4 Req 5A Reg 58 Reg SC Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $54,000 each month. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,700 units)? OYes ONO