Memofax, Inc., produces memory enhancement kits for fax machines. 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 (13,500 units at $20 per unit) $ 270,000 Variable expenses 162,000 ________________________________________ ________________________________________ Contribution margin 108,000 Fixed expenses 120,000 ________________________________________ ________________________________________ Net operating loss $ (12,000) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ Required: 1. Compute the company's CM ratio and its break-even point in both units and dollars. 2. The sales manager feels that an $6,500 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $87,000 increase in monthly sales. If the sales manager 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 president is convinced that a 10% reduction in the selling price, combined with an increase of $37,000 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 companys advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.80 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 slash its variable expenses in half. However, fixed costs would increase by $118,000 per month. a. Compute the new CM ratio and the new break-even point in both units and dollars. Use the CM ratio to calculate your break-even point in dollars