Due to erratic sales of its sole product a high-capacity battery for laptop computers PEM, Inc., has been experiencing difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (12,900 units x $40 per unit) $516,000 Variable expenses 258,000 258,000 Contribution margin 288,000 Fixed expenses Net operating loss (30,000) Required: 1. Compute the company's CM ratio and its break-even point in both unit sales and dollar sales. CM ratio Break-even point in units Break-even point in dollars 2. The president believes that a $6,400 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $83,000 increase in monthly sales. If the president is right, what will be the effect on the company's monthly net operating income or loss? (Use the incremental approach in preparing your answer.)