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 (13,200 units $30 per unit)	$	396,000
Variable expenses		198,000
Contribution margin		198,000
Fixed expenses		220,500
Net operating loss	$	(22,500	)

Required:

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

2. The president believes that a $6,800 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $87,000 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 $30,000 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 $0.80 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,600?

5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $51,000 each month.

a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.

b. Assume that the company expects to sell 20,100 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.)

c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,100)?

Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Reg 4 Req 5A Req 5B Req 5C The president believes that a $6,800 increase in the monthly advertising budget, combined with an inten: sales staff, will result in an $87,000 increase in monthly sales. If the president is right, what will be the ir the company's monthly net operating income? (Do not round intermediate calculations.) Increases by $ 36,700 c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,100)? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5A Req 5B Req 5C Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, comt increase of $30,000 in the monthly advertising budget, will double unit sales. If the sales manager is righ revised net operating income (loss)? (Losses should be entered as a negative value.) Revised net operating income (loss) $ 343,500 Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5A Req 5B Req 5C Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop com grow sales. The new package would increase packaging costs by $0.80 per unit. Assuming no other chan would have to be sold each month to attain a target profit of $4,600? (Do not round intermediate calcula: answer to the nearest whole unit.) Unit sales to attain target profit Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req2 Req3 Req3 Req 4 Rega Req 5A Req 5A Req 5B Req 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. H expenses would increase by $51,000 each month. Compute the new CM ratio and the new break-even po dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whole percentage ( entered as "23") and other answers to the nearest whole number.) CM ratio Break-even point in unit sales Break-even point in dollar sales Req 1 Req 2 Req 3 Req 4 Req 5A Req 5B Req 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $51,000 each month. Assume that the company expects to sell 20,100 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 intermediate calculations. Round your percentage answers to the nearest whole number.) Show less A PEM, Inc. Contribution Income Statement Not Automated Total Per Unit % Automated Total Per Unit % % 0 $ 0 0 % 0 % 0 % $ 0 $ 0 Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Reg 4 Req 5A Req 5B Req 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $51,000 each month. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,100)? OYes ONO