Due to erratic sales of its sole producta high-capacity battery for laptop computersPEM, Inc., has been experiencing financial difficulty for some time. The companys contribution format income statement for the most recent month is given below:

Sales (12,900 units $30 per unit)	$	387,000
Variable expenses		232,200
Contribution margin		154,800
Fixed expenses		172,800
Net operating loss	$	(18,000	)

Required:

1. Compute the companys CM ratio and its break-even point in 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 $88,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the companys monthly net operating income?

3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $38,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?