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

Sales (12,700 units $30 per unit)	$	381,000
Variable expenses		190,500
Contribution margin		190,500
Fixed expenses		213,000
Net operating loss	$	(22,500	)

1.) 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 $85,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the companys monthly net operating income?

2. 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.

A.) Assume that the company expects to sell 20,300 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.)