Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Due to erratic sales of its sole product- a high-capacity battery for laptop computers- PEM, Inc., has been experiencing financial difficulty for some time. The

image text in transcribed
Due to erratic sales of its sole product- a high-capacity battery for laptop computers- PEM, Inc., has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (13,000 units x $30 per unit) $390,000 Variable expenses $195,000 Contribution margin $195,000 Fixed expenses $217,500 Net operating loss ($22,500) Requirements 1. Compute the company's unit CM ratio to find its break-even point in unit sales. 2. Compute the company's CM ratio to find its break-even point in sales dollars. 3. The president believes that a $6,800 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $82,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? 4. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $31,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? 5. 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 $.70 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,500

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Wiley CIA Essentials Of Internal Auditing Part 1 Exam Review 2023

Authors: S. Rao Vallabhaneni

1st Edition

1119987148, 978-1119987147

More Books

Students also viewed these Accounting questions

Question

Describe the linkages between HRM and strategy formulation. page 74

Answered: 1 week ago

Question

Identify approaches to improving retention rates.

Answered: 1 week ago