Due to erractic sales of its sole product - a high capacity battery for laptop computers-Pem Inc,. has been experiencing financial diffuculty for some time. The company's contribution format income statement for the most recent is given below :
Due to erratic sales of its sole product-a high-capacity battery for laptop computersPEM, Inc., has been experiencing fin difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (13,000 units X $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 260,000 156,000 104,000 116,000 $ (12,000) 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 $6,100 increase in the monthly advertising budget, combined with an intensified effort by the staff, will increase unit sales and the total sales by $88,000 per month. If the president is right, what will be the increase (decr. the company's monthly net operating income? 2 Pofor Reg 1 Reg 2 Reg 3 Req 4 Req 5A Req 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 $37,000 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) ( Req 2 Req 4 > Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $51,000 each month. Assume that the company expects to sell 20,300 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 A PEM, Inc. Contribution Income Statement ES Not Automated Automated Total Per Unit % Total Per Unit $ 20 100% $ 20 100 % w 12 601% 9 Sales I Variable expenses Contribution margin 451% 0 $ 8 40% 0 $ 55% 167.000 Fixed expenses 116,000 $ (116,000) $ (Net operating income (167,000)
