Due to erratic sales of its sole product$-$a high$-$capacity battery for laptop computers$-$PEM, Incorporated, has been

experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month

is given below:

Required:

Compute the company's $CM$ ratio and its break$-$even point in unit sales and dollar sales.

The president believes that a $$6,400$ increase in the monthly advertising budget, combined with an intensified effort by the

sales staff, will increase unit sales and the total sales by $$87,000$ per month. If the president is right, what will be the increase

$($decrease$)$ in the company's monthly net operating income?

Refer to the original data. The sales manager is convinced that a $10\%$ reduction in the selling price, combined with an

increase of $$39,000$ in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the

revised net operating income $($loss$)?$

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\mathrm{.}80$ per unit. Assuming no other changes, how many units

would have to be sold each month to attain a target profit of $$4,100?$

Refer to the original data. By automating, the company could reduce variable expenses by $$3$ per unit. However, fixed

expenses would increase by $$53,000$ 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 $20,700$

units$)?$

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