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 (13,200 units * $40 per unit)	$528,000
Variable expenses	264,000
Contribution margin	264,000
Fixed expenses	294,000
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.

2) The president believes that a $6,100 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $86,000 increase in monthly sales. If the president is right, what will be the effect on the company's monthly net operating income or loss?

3) 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. What will the new Contribution format income statement look like if these changes are adopted?