PEM, Incorporated, 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 $$6,600$ increase in the monthly advertising budget, combined with an intensified effort by the sales staff,

will increase unit sales and the total sales by $$90,000$ 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 that a $10\%$ reduction in the selling price, combined with an increase of

$$34,000$ 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 that a fancy new package for the laptop computer battery would grow

sales. The new package would increase variable costs by $$0\mathrm{.}80$ per unit. Assuming no other changes, how many units would have

to be sold each month to attain a target profit of $$4,700?$

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

would increase by $$51,000$ 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 $20,300$ 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 $($Assuming that the company expects to sell $20,300$ units$)?$

Complete this question by entering your answers in the tabs below.

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

increase of $$34,000$ in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the

revised net operating income $($loss$)?$

Note: Losses should be entered as a negative value.