Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, incorporated, has been expericncing financial difficulty for some time. The company's contribution format income statement for the gost recent monthis 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 $6,800 increase in the monthly advertising budget, combined with an intensified effort by the sales staft will increase unit sales and the total sales by $86,000 per month, If the president is right, what will be the increase (decrease) in the company's monthly net operating income? 3. Rufer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $38,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, whot 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 Loptop 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 $4100 ? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $55,000 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 20,500 units next month. Prepore 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 outomote its operations (Assuming that the compary expects to sel 20,500 units)? Compiete this question by entering your answers in the tabs below. Compute the companys CM ratic and its brezk-even point in unit sales and dollar bales. (Do not round intermediace Complete this question by entering your answers in the tabs below. Compute the company's CM ratio and its break-even point in unit sales and dollar sales, (Do not rourat intermediate eolculatipns, Round "CM ratio" to the nearest whole percentage (Le, 0.234 should be entered as "23th, Complete this question by entering your answers in the tabs below. The president believes that a $6,800 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $86,000 per month. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? (Do not round intermed iate calculations.) Complete this question by entering your answers in the tabs below. Refer to the original data. The saies manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales, If the sales mangger is right, what will be the revised net operating income (loss)? (Losses should be entered as a negatve value.) Complete this question by entering your answers in the tabs below. Refer to the original data, The Marketing Departwent thinks that a fancy new package for the laptop computer battery woufd grew 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 \$4,100? (Do not rouind intermediate calculations: Round final arswer up to the nearest whole unit.) Complete this question by entering your answers in the tabs below. Refer to the original dats. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $55,000 each month. Compute the new CM ratio and the new break-even point in unit sales and dollar gales. (Do not round intermediate calculations. Round "CM rotio" to the nearest whole percentage (i.e., 0.234 should be entered as "23"), round "Break-even point in unit sales" up to the nearest whole unit and round "Breokeeven point in dollar sales" to the nearest whole doliar.) Complete this question by entering your answers in the tabs below. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit, However, fxed expenses would increase by $55,000 each month. Assume that the company expects to sell 20,500 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are, (Show dota 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.)
