Key Storage Inc. produces USB drives. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company$$s contribution format income statement for the most recent month is given below:

Sales $(21,800$ units$)$ $ $545,000$

Less: Variable expenses $348,800$

Contribution margin $196,200$

Less: Fixed expenses $218,000$

Net operating loss $ $(21,800)$

Required:

$1.$ Compute the company$$s CM ratio and its break$-$even point in both units and dollars. $($Do not round intermediate calculations. Round your "Break$-$even point in units" answer up to nearest whole number.$)$

$2.$ The sales manager feels that an $$36,800$ increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $$10,000$ increase in monthly sales. If the sales manager is right, what will be the effect on the company$$s monthly net operating income or loss? $($Use the incremental approach in preparing your answer.$)$

$3.$ Refer to the original data. The president is convinced that a $10\%$ reduction in the selling price, combined with an increase of $$109,000$ in the monthly advertising budget, will double unit sales. Should the company make these changes?

multiple choice

Yes

No

$4.$ Refer to the original data. The company$$s advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $$1\mathrm{.}0$ per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $$4,860?($Do not round intermediate calculations. Round your answer up to nearest whole number.$)$

$5.$ Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $$127,000$ per month.

a$.$ Compute the new CM ratio and the new break$-$even point in both units and dollars. $($Do not round intermediate calculations. Round your "Contribution margin ratio" answer to $2$ decimal places. Round your "Break$-$even point" answers up to nearest whole number.$)$Refer to the original data. The president is convinced that a $10\%$ reduction in the selling price, combined with an increase

of $$109,000$ in the monthly advertising budget, will double unit sales. Should the company make these changes?

Yes

No

Refer to the original data. The company's advertising agency thinks that a new package would help sales. The new package being

proposed would increase packaging costs by $$1\mathrm{.}0$ per unit. Assuming no other changes, how many units would have to be sold each

month to earn a profit of $$4,860?($Do not round intermediate calculations. Round your answer up to nearest whole number.$)$

Unit sales to attain target profit

units

Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase

by $$127,000$ per month.

a$.$ Compute the new CM ratio and the new break$-$even point in both units and dollars. $($Do not round intermediate calculations.

Round your "Contribution margin ratio" answer to $2$ decimal places. Round your "Break$-$even point" answers up to nearest whole

number.$)$