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 (12,700 units at $20 per unit)	$	254,000
Variable expenses		152,400
Contribution margin		101,600
Fixed expenses		113,600
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 $6,300 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $90,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company