Memofox, Inc. produces memory enhancement software for computers. Sales have been very erratic, with some months showing profit and some months showing a loss. The company's contribution format income statement for the most recent month is given below. Bala (20,000 unita) LARE Variable expenses Contribution margin Lens Fixed expenses Het operating loss $ 400,000 240.000 160,000 170,000 $(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 401% 21,250 425,000 $ 2. The sales manager feels that an $24,000 increase in the monthly advertising budget combined with an intensified effort by the sales staff, will result in a $150,000 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.) Answer is complete but not entirely correct. Increase in monthly net operating income $126,000 3. Refer to the original data. The president is convinced that a 9% reduction in the selling price, combined with an increase of $75,000 in the monthly advertising budget will double unit sales. Should the company make these changes? 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 $0.5 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $6,1007 (Do not round Intermediate calculations. Round your answer up to nearest whole number.) RO 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 $0.5 per unit. Assuming no other changes, how many units would have to be sold each month to eam a profit of $6,500? (Do not round Intermediate calculations. Round your answer up to nearest whole number) units 5. Refer to the original data. By automating, the company could slash its variable expenses in holt. However, fixed costs would increase by $41,000 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) % Contribution margin ratio Break-even point in units Bak-even point in dollars
