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.

b. Assume that the company expects to sell 21,000 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.)

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 (12, 800 units X $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 256, 000 128,000 128,000 143,000 $ (15, 000)