PEM, Incorporated, is expentencing financial dificulty due to erratic sales of its only product, a high-capacity battery for laptop computers. The company's contribution formatincome statement for the most recent month is given below: Required: 1. Compute the companys CM ratlo and its breakewen point in unit sales and dollat sales 2. The president belleves a $6,800 increase in the monthly advertising budget, combined with an intersified effort by the sales staft, wili increase unit sales and the total sales by $86,000 per month. If the president is tight, what will be the increase (decrease) in the company's monthly net operating income? 3. Refer to the originai data. The sales manager is convinced that a 10% reduction in the selling price, combined wath an increase of $39,000 in the monthly advertising budget will double unit sales. If the sales manager is right, what will be the revised net operating income doss)? 4. Refer to the original data. The Marketing Department thinks thot a fancy new package for the loptop computer battery would grow sales, The new package would increase variable costs by $0.50 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,300 ? 5. Pefer to the originat dota. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would inciease by $52.000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar soles. b. Assume the company expects to sell 20.900 units next month. Prepare two contribution format income statements, one assuming operations are not autocrated and one assuming they aie. ishow data on a per-unit and percentage basis, as well as in total, for each alternative) c. Would you reconmend the compary automate its operations (Assuming that the company expects to sell 20,900 units)? PEM, Incorporated, is expentencing financial dificulty due to erratic sales of its only product, a high-capacity battery for laptop computers. The company's contribution formatincome statement for the most recent month is given below: Required: 1. Compute the companys CM ratlo and its breakewen point in unit sales and dollat sales 2. The president belleves a $6,800 increase in the monthly advertising budget, combined with an intersified effort by the sales staft, wili increase unit sales and the total sales by $86,000 per month. If the president is tight, what will be the increase (decrease) in the company's monthly net operating income? 3. Refer to the originai data. The sales manager is convinced that a 10% reduction in the selling price, combined wath an increase of $39,000 in the monthly advertising budget will double unit sales. If the sales manager is right, what will be the revised net operating income doss)? 4. Refer to the original data. The Marketing Department thinks thot a fancy new package for the loptop computer battery would grow sales, The new package would increase variable costs by $0.50 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,300 ? 5. Pefer to the originat dota. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would inciease by $52.000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar soles. b. Assume the company expects to sell 20.900 units next month. Prepare two contribution format income statements, one assuming operations are not autocrated and one assuming they aie. ishow data on a per-unit and percentage basis, as well as in total, for each alternative) c. Would you reconmend the compary automate its operations (Assuming that the company expects to sell 20,900 units)
