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 (12,800 units $20 per unit) $ 256,000 Variable expenses 128,000 Contribution margin 128,000 Fixed expenses 143,000 Net operating loss $ (15,000 ) Required:

1. Compute the companys CM ratio and its break-even point in unit sales and dollar sales.

2. The president believes that a $6,600 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 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 $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)?

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 $0.60 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,100?