Memofax, Inc. produces memory enhancement software for computers. 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 (16,000 units) Less: Variable expenses Contribution margin Less: Fixed expenses Net operating loss $ 640,000 448,000 192,000 282,000 $(10,000) 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.) Contribution margin ratio Break-even point in units Break-even point in dollars % 2. The sales manager feels that an $16.000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $110,000 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.) Save & Exit

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