Due to erratic sales of the company's sole product has been experiencing difficulty for some time. The contribution format income statement for the most recent month is given below:

Sales (13,500 units $20 per unit). . . . . . . . . . . . . . . .	$270,000
Variable expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	189,000
Contribution margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81,000
Fixed expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	90,000
Net operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ (9,000)

Required

Create and upload an Excel spreadsheet which shows the following (remember to show adequate work and use appropriate formulas):

1. Compute the companys CM ratio and its break-even point in both unit sales and dollar sales.
2. The president believes that a $8,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $70,000 increase in monthly sales. If the president is right, what will be the effect on the companys monthly net operating income or loss? (Use the incremental approach in preparing your answer.)
3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $35,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted?
4. Refer to the original data. The Marketing Department thinks that a new package would help 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 earn a profit of $4,500?
5. Refer to the original data. By automating, the company could reduce variable expenses in half. However, fixed expenses would increase by $118,000 each month.

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

b. Assume that the company expects to sell 20,000 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? Explain.

Check figures and values:

Part 1 CM ratio = 30% Part 2 Positive effect Part 3 Negative effect Part 4 17,500 units