Due to erratic sales of its sole product a high-capacity battery for laptop computers PEM Ltd has been experiencing difficulty for some time. The companys statement of profit or loss for the most recent month is given below:

Sales (28,500 units 30)	855,000
Less variable expenses	598,500
Contribution margin	256,500
Less fixed expenses	277,200
Net loss	20,700

Required:
1.	Compute the company's CM ratio.
	Compute the company's break-even point in units.
	Compute the company's break-even point in pounds. (Do not round intermediate calculations.)

2.	The president believes that a 88,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an 440,000 increase in monthly sales. If the president is right, what will be the effect on the companys monthly profit or loss? (Use the incremental approach in preparing your answer.)

3.	Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of 150,000 in the monthly advertising budget, will cause unit sales to double. What will the new statement of profit or loss look like if these changes are adopted?

4.	Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would help sales. The new package would increase packaging costs by 0.75 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of 16,500? (Do not round intermediate calculations.)

5.	Refer to the original data. By automating certain operations, the company could reduce variable costs by 3 per unit. However, fixed costs would increase by 126,000 each month.

	(a)	Compute the new CM ratio.
		Compute the new break-even point in units.
		Compute the new break-even point in pounds. (Do not round intermediate calculations.)

	(b)	Assume that the company expects to sell 47,600 units next month. Prepare two statements of profit or loss, 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)	It is always beneficial for the company to automate its operations as it will increase the company CM ratio.
		multiple choice True False