PEM, Inc., is experiencing financial difficulty due to erratic sales of its only product, a high$-$capacity battery for laptop computers. The

company's contribution format income statement for the most recent month is given below:

Required:

Compute the company's CM ratio and its break$-$even point in unit sales and dollar sales.

The president believes a $$16,000$ increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will

increase unit sales and the total sales by $$80,000$ per month. If the president is right, what will be the increase $($decrease$)$ in the

company's monthly net operating income?

Refer to the original data. The sales manager is convinced a $10\%$ reduction in the selling price, combined with an increase of $$60,000$ in

the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income $($loss$)?$

Refer to the original data. The Marketing Department thinks a fancy new package for the laptop computer battery would grow sales. The

new package would increase variable costs by $75$ cents per unit. Assuming no other changes, how many units would have to be sold each

month to attain a target profit of $$9,750?$

Refer to the original data. By automating, the company could reduce variable expenses by $$3$ per unit. However, fixed expenses would

increase by $$72,000$ each month.

a$.$ Compute the new CM ratio and the new break$-$even point in unit sales and dollar sales.

b$.$ Assume the company expects to sell $26,000$ units next month. Prepare two contribution format income statements, one assuming

operations are not automated and one assuming they are. $($Show data on a per$-$unit and percentage basis, as well as in total, for each

alternative.$)$

c$.$ Would you recommend the company automate its operations? Explain.