5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $55,000 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 20,000 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 operations (Assuming that the company expects to sell 20,000)?

Due to erratic sales of its sole product-a high-capacity battery for laptop computersPEM, 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 (13,100 units x $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 262,000 131,000 131,000 146,000 $ (15,000) Req 1 Req 2 Req 3 Reg 4 Req 5A Req 5B Req 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fi expenses would increase by $55,000 each month. Compute the new CM ratio and the new break-even point in uni dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whole percentage (i.e., 0.23 entered as "23") and other answers to the nearest whole number.) S CM ratio % 15,462 Break-even point in unit sales Break-even point in dollar sales Reg 1 Req 2 Req3 Req 4 Req 5A Req 5B Req 50 Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $55,000 each month. Assume that the company expects to sell 20,000 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.) (Do not round your intermediate calculations. Round your percentage answers to the nearest whole number.) Show less PEM, Inc. Contribution Income Statement Not Automated Automated Total Per Unit % Total Per Unit % % % % % 0 $ 0 0 % 0 $ 0 0% $ 0 $ 0 Reg 5A Reg 50 Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5A Req 5B Req 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $55,000 each month. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,000)? Yes No Req 5B Req 5C