PEM, Incorporated, is experlencing 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 unlt sales and dollar sales.

$2$ The president belleves a $$6,200$ increase in the monthly advertising budget, combined with an intensified effort by the sales staff. will increase unit sales and the total sales by $$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 $$38\mathrm{.}000$ in the monthly advertsing budget. will double unit sales. If the sales manager is right, what will be the revised net operating income $($loss$)?$

Refer to the orlginal data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase varlable costs by $$070$ per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $$4,200?$

Refer to the orlginal data. By automating, the company could reduce variable expenses by $$3$ per unit. However, fixed expenses would increase by $$52,000$ each month.

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

b$.$ Assume the company expects to sell $20,900$ units next month. Prepare wo contrbution 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 altemative.$)$

c$.$ Would you recommend the company automate its operations $($Assuming that the company expects to sell $20,900$ units$)?$

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