Due to erratic sales of its sole product-a high-capacity battery for laptop computersPEM, Inc., has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (12,500 units x $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 250,000 125,000 125,000 140,000 $ (15,000) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,300 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $83,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company's 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 $34,000 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? Req 1 Reg 2 Reg 3 Req 4 Req 5A Req 5B Req 5C 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").) CM ratio % Break-even point in unit sales Break-even point in dollar sales Req 1 Req 2 > Req 1 Req 2 Req 3 Req 4 Req 5A Req 5B Req 5C The president believes that a $6,300 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $83,000 increase in monthly sales. If the president is right, what will be the increase (decrease) the company's monthly net operating income? (Do not round intermediate calculations.) by Increases Decreases Req 1 Reg 2 Reg 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, combined with an increase of $34,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? (Losses should be entered as a negative value.) Revised net operating income (loss) Req 1 Reg 2 Reg 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 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? (Do not round intermediate calculations. Round final answer to the nearest whole unit.) Show less Unit sales to attain target profit
