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 $$6,500$ increase in the monthly advertising budget, combined with an

intensified effort by the sales staff, will increase unit sales and the total sales by $$85,000$ 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 $$36,000$ 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{.}40$ per unit.

Assuming no other changes, how many units would have to be sold each month to attain a target profit of

$$4,300?$

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 $20,600$ 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 $20,600$ units$)?$