Due to erratic sales of its sole product-a high-capacity batery 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: 1. Compute the company's CM ratio and its break-even point / unit sales and dollar sales 2. The president believes that a $6,600 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $82,000 per month. if the president is right, what will be the increase (decrease) in the company's monthly net operating income? 3. Refer to the onginal data. The ales manager is convinced that a 10% reduction in the seling price, combined with an increase of $30,000 in the monthly advertising budget, will double unit sales, If the sales manager is right, whot will be the revised net operating incorne (iosst? 4. 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 $0.80 per unit. Assuming no other changes, how many units would have to be soid each month to attain a target profit of 54,600 ? 5. Refer to the original data. Ey automating, the company could reduce varioble expenses by $3 per unit. However, fixed expenses would increase by $57,000 each month a. Compute the new CM rotio and the new break-even point in unit sales and dollar sales b. Assume that the company expects to sell 20,200 units next month. Prepare two contribution format income statements. one assuming that operations are not automated and one assuming that they are. (Show dato on a per unit and percentage basis, as weil as in totel, for each altemative.) c. Would you recommend that the company automate its operations (Assuming that the company. expects to sell 20,200 units)? Compute the company's CM ratio and its break-even point in unit sales and dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whole percentage (i,e, 0.234 should be entered as "23"). The president believes that a $6,600 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $82,000 per month. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? (Do not round intermediate calculations.) Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $30,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be The revised net operating incorne (loss)? (Losses should be entered as a negative value.) 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 $0.80 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,600 ? (Do not round intermediate calculations. Round final. answer up to the nearest whole unit.) Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $57,000 each month. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whole percentage (I.e., 0.234 should be entered as " 23" ), round "Break-even point in unit sales" up to the nearest whole unit and round "Break-even point in dollar sales" to the nearest whole dollar.) Refer to the original data, By automating, the company could reduce variable expenses by $3 per unit However, fixed expenses would increase by $57,000 each month. Assume that the company expects to sell 20,200 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.) (Do not round your intermiediate calculations. Round your percentage answers to the nearest whole number)
