Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Incorporated, has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below. Sales (13,000 units x $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 260,000 156,000 104,000 116,000 $ (12,000) 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 $7,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $88,000 per month. 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 $36,000 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 $0.40 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,800? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $53,000 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 20,800 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 20,800 units)?

Due to erratic sales of its sole product-a high-capacify battery for laptop computers - PEM, Incorporated, has been experiencing financial difficulfy for some time. The company's contribution format income statement for the most recent month is given below 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 $7,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $88.000 per month. If the president is nght 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 seling price, combined with an increase of $36,000 in the monthly advertising budget, will double unit sales if the sales manager is iight, what will be the revised ret 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 $0.40 per unit Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,800 ? 5. Refer to the original data. By automating, the company could reduce vanable expenses by 53 per unit. However, fixed experses would increase by $53,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and doliar sales b. Assume that the company expects to sell 20,800 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 pereentage basis, as well as in total, for each aiternative) Welfas in toral, c. Would you recommend that the company automate its operations (Assuming that the company expects to seli 20.800 units)? well as in total, for each alternative) c. Would you recommend that the company automate its operations (Assuming that the compary expects to sell 20.800 units)? Complete this question by entering your answers in the tabs below. Compute the company's cM ntio and its break-even peint in unit sales and doliar sales. (Do not round intermediate calculations. Fourid "CM ratio" to the nearest whole percentage (ie., 0.234 should be entered as "23"). Well as in total, for each alternative) c. Would you recommend that the company automate its operations (Assuming that the compary expects to sell 20,800 units) Complete this question by entering your answers in the tabs below. The president believes that a $7,000 increase in the monthly advertising budget, combined with an intensiffed effort by the sales staff, will increase unit sales and the total fales by 380,000 por month. If the prealdent is right, what wall be the increase (decrease) in the company's monthly net operating income? (Do not round intermadiate calculations.) b. Assume that the company expects to sell 20,800 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 20,800 inits) Complete this question by entering your answers in the tabs below. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $36,000 in the monthly advertising budget, will double unit sales, if the sales manager is right, what will be the revised net operating income (locs)? (Losses should be entered as a negative value.) well as in total, tor each altemative) c. Would you recommend that the company autorsate its operations (Assuming that the compary expects to sell 20,800 units)? Complete this question by entering your answers in the tabs befow. Refer to the origtnal data. The Marketing Department thinke that a fancy new package for the faptop computar battery would grow cales. The neke package would increase packaging costs by so.40 per unit. Aswerning he ether changes, how matify unis answer up to the nearest whole unith) wele as in total, for each altemotive) c. Would you recommend that the company automate its operations (Assuming that the compary expects to sell 20800 units? Complete this question by entering your answers in the tabs below. Rafer to the originat data, 0y autornating, the company could reduce variable expenses by 53 per unit, However, foed expenses would increase by $53,000 each month. Compate the nes CM ratie and the new break even point in unit sales and sates* to the rearest wolen dollan) Refer to the eriginal datal. By auternating, the compary coufd reduce variable mxpense: by 83 per wint. Howeter, fixed mxpennen would increase ty $53,900 each month. Astume that the company expets to beti 20,600 units noxet month. Prepare fwo centribution format income statements, one assuming that operations are not automated und sene assuming that thery are. (Show dafa on a per unit and percentage basis, as well is in total, for each alteriathev) (Do fot round your interfnediate calculatians Round your percentage answers to thet nearest wbole numbers assuming that operotions are not automated and one assumung that they are. (show data on a per unit and percentage busis, as wel as in total, for each altemative) c. Would you recommend that the compary automate its operations (Assuming that the cornpany expects to sell 20,800 unts? Complete this question by entering veur answers in the tabs below. Rofor to the original data, isy autormating, the compary could reduce variable expenses by 37 per unit. Homiver, fixed expenses would increase by $93,000 each month. Would yos recommend that the company automate ito operations (Assuring that the compary expecti to sell 20,800 units)